Honeywell 2013 Annual Report

A N N U A L R E P O R T 2 0 1 3
SHAREOWNER LETTER2014
March 1, 2014
We had very good performance in another weakish year in the global economy. We
were able to grow sales 4% to $39.1 billion and earnings per share* by 11% to $4.97. Our
segment margin rate grew 70 basis points to 16.3% and free cash flow
**
grew to $3.8 billion, a
96% conversion rate.
**
As usual, we also took the opportunity to continue our seed
plantingproducts, technologies, restructuring, geographies, services, processes, new
capacityto ensure that growth continues far into the future.
Five-Year Plan
The year 2014 is the last in the five-year plan (2010-2014) Honeywell introduced in
March 2010. Despite economic and foreign exchange headwinds versus what we assumed
then, weve performed quite well as you can see from the chart below.

$30.0
$39.1
$41.0 -
45.0
$40.3 -
40.7
2009 2013 2014E 2014 Target
Sales ($B)
13.3%
16.3%
16.0 -
18.0%
16.6 -
16.9%
2009 2013 2014E 2014 Target
Segment Margin Rate
We estimate that those headwinds versus our original macro assumptions cost us about
$3 billion in sales over the 2010-2014 period. Even with those headwinds, we expect to
almost touch the bottom of the targeted sales range growing sales 6% annually and expect to
be around the midpoint of the margin rate range (a margin rate increase of approximately 350
basis points).
While there was a lot of skepticism in 2010 about our five-year plan, our performance
has generated a lot of interest in the next five-year plan covering 2014-2018. We will be
introducing it at Investor Day on March 5. Our intent, of course, is to continue outperforming
our peers, and we look forward to discussing it with you.
Business Model
That outperformance will continue through the application of our Business Modela
great portfolio of businesses, a focus on internal processes, and a culture that learns,
evolves, and performs. With the recently announced divestiture of Friction Materials, were
now at a point where 99% of the Companys sales come from Great Positions in Good
Industries. That is, markets where we can win with differentiated technology. Thats a nice
position to be in and allows us to use our disciplined acquisition process to fuel further
growth.
* Proforma, V% exclude pension mark-to-market adjustment
** Free cash flow (cash flow from operations less capital expenditures) and free cash flow conversion prior to any cash pension
contributions, NARCO Trust establishment payments and cash taxes relating to the sale of available for sale investments
There is a lot more opportunity to ensure the machinery works better every day through
our key process drivers the Honeywell Operating System (HOS), Velocity Product
Development (VPD), and Functional Transformation (FT). Improving those processes
constantly allows our 131,000+ employees to be more efficient and effective every day. We
can make all kinds of great business and strategic decisions, but if there arent great
processes to implement them, it doesnt matter much.
Culture is equally important to sustained performance. The ability to learn and evolve
faster than our markets, to be a Thinking Company, to recognize The Trick is in the Doing,
to see the difference between Compliance with Words and Compliance with Intent, the
ability to accomplish Two Seemingly Conflicting Goals at the Same Time, to achieve our
quarterly targets while Seed Planting for quarters three years from now. Culture makes a
difference... and ours is hugely different from what it was.
Leadership
Our Business Model works because we have terrific leaders to make it happen.
Leadership also makes a difference.
I often say that Leadership requires three elements of which only one is very visible. The
first is the ability to mobilize or excite a workforce. This one is the most visible, gets the most
attention, and Id say is only 5% of the job of a leader. The second element is the ability to
pick the right directionand to be able to do it even in the face of whats considered
collective wisdom at the time. Some have referred to that collective wisdom as Fad Surfing,
a term I like myself because thats exactly what happens. Many leadership errors occur
because leaders follow fads and dont think for themselves. The third element is the ability to
get the entire organization moving step-by-step in the right direction. This one is tough
because many leaders start to think their job is to just make the decisions and let others
handle the step-by-step, get it done, work. Thats also a leadership mistake. Leaders have to
be involved in ensuring that step-by-step the organization moves in the right direction. That
the machinery works. Thats not micro management, thats leadership that understands no
good decision is worth anything unless it actually gets done.
Our strength as a company has been those second and third elements that arent as
visible but that represent 95% of leadership. Having a sound, consistent strategy and
executing against it day-by-day. Letting our competitors be the guys making the wonderful
new strategic shifts every couple of years that get a lot of attentionand no results.
Cash Deployment
Our focus on implementing the Business Model and having the right kinds of leaders has
shown up in operating results, stock performance, and cash flow. That has resulted in a cash
balance at year end of $6.4 billion and debt of $8.8 billion causing a lot of investor questions
along the lines of, So Dave, what are you going to do with the cash? My first response is
that no one should worry about me blowing it or doing something silly. After 12 years in this
job, its really nice Investors generally accept that, because they werent so sure in the
beginning.
Our first priority is to continue driving superior cash flow by having high quality earnings.
That is, to have a high free cash flow conversion rate** (Free Cash Flow** divided by Net
Income*). In this decade we have averaged about 122% free cash flow conversion** meaning
very high-quality earnings.
The next priority is to ensure we invest in our businesses. We have to keep seed
planting. Thats particularly noteworthy now as we invest more heavily in Performance
Materials and Technologies (PMT) for new production capacity to support orders weve
already won. Thats a very nice position to be in where plants are basically full the day they
are completed. Well spend an additional $300 million of CAPEX in 2014 and about the same
amount again in 2015 largely driven by PMT plant projects. These are high IRR (Internal Rate
of Return) projects and a great use of shareowner funds to drive future performance in cash
and earnings.
The next priority is to pay a strong competitive dividend that we can be reasonably
confident will never be cut. Importantly, shareowners should have reasonable confidence that
the dividend will continue to grow in the future as we perform. Over the last 10 years we have
increased our dividend per share 140% from $0.75 to $1.80 per annum.
I used to say that after CAPEX and dividends, there were two other potential uses for
cashshare repurchases and acquisitions. Now I would add a third and that is to let cash
build a bit. When it comes to share repurchases, we want to do enough on an ongoing basis
to keep share count flat. Beyond that, we want to be opportunistic so were buying at the right
time. Studies estimate that nearly two out of three companies in the S&P 500 repurchase at
the wrong time. Id say the 2007 big repurchase we did wasnt one of my better decisions.
While we repurchased at an average price of $54 and today its about $90 (so it wasnt that
bad), it sure would have felt better to have that $4 billion in the middle of the recession when
the stock price dropped to $23.23. Our repurchase strategy is to do enough on an ongoing
basis to hold share count flat (dollar cost averaging if you will) and be opportunistic for bigger
amounts when we can be confident we will be in the one third of companies that get the
timing right.
Letting cash build a bit will also let us be opportunistic to do more smart acquisitions,
something we do very well and now have a lot of credibility given our performance. We
continue to adhere to a rigorous, disciplined process that results in not overpaying, great
execution, and terrific results for shareowners. We have four major stepsidentification,
valuation, due diligence, and integration. We developed this process internally and it works.
That adherence to discipline begins with me. For any deal over $50 million I personally
conduct the integration review pre-close, at 30-60-90 days, and quarterly thereafter for at
least a year to ensure we are performing as we said we would. We also never allow sales
synergies to be included in a valuation model. We do achieve good sales synergies and they
are a nice return upside, but I dont want anyone counting on them. The process works.
The problem with good acquisitions is that the timing is unpredictable. I cant say with
confidence how much well be able to spend in any year. Ive likened it to being in a retail
store where from 10AM to 2PM no one comes in and at 2:07PM, six people walk in at the
same time. We have to be ready when the time comes to take advantage of the opportunity.
* Proforma, excludes pension mark-to-market adjustment
** Free cash flow (cash flow from operations less capital expenditures) and free cash flow conversion prior to any cash pension
contributions, NARCO Trust establishment payments and cash taxes relating to the sale of available for sale investments. 2008
free cash flow excludes cash taxes related to the sale of the Consumable Solutions business.
That ability to be opportunistic with both buybacks and acquisitions is why letting some
cash build gives us that flexibility. Additionally given the uncertainty of the economic times,
who knows what will happen? In uncertain times, cash is a good friend to have.
Summary
Were really proud of what weve been able to accomplish and even more excited about
where all our Seed Planting is going to take us.
Our Leaders will continue to focus on the customer and understand that if we dont do a
good job for customers in quality, delivery, new products, and project delivery then there
wont be any success for our employees or our investors. Our customers success is our
success.
Its exciting to be at Honeywell. We look forward to sharing our new five-year plan with
you at Investor Day on March 5.
DAVID M. COTE
Chairman and Chief Executive Officer
Notes to Shareowner Letter:
1) Reconciliation of EPS to EPS, Excluding Pension Mark-to-Market Adjustment
2012
(a)
2013
(b)
EPS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3.69 $4.92
Pension Mark-to-Market Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.79 0.05
EPS, Excluding Pension Mark-to-Market Adjustment . . . . . . . . . . . . . . . . . . . . $4.48 $4.97
(a) Utilizes weighted average shares of 791.9 million. Mark-to-market uses a blended tax
rate of 35.0%.
(b) Utilizes weighted average shares of 797.3 million. Mark-to-market uses a blended tax
rate of 25.5%.
2) Reconciliation of Segment Profit to Operating Income Excluding Pension Mark-to-Market
Adjustment and Calculation of Segment Profit and Operating Income Margin Excluding
Pension Mark-to-Market Adjustment
($M)
2009 2012 2013
Segment Profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,991 $ 5,879 $ 6,351
Stock Based Compensation
(a)
. . . . . . . . . . . . . . . . . . . . . . . . (117) (170) (170)
Repositioning and Other
(a,b)
. . . . . . . . . . . . . . . . . . . . . . . . . . (493) (488) (699)
Pension Ongoing (Expense) Income
(a)
. . . . . . . . . . . . . . . . (287) (36) 90
(a)
. . . . . . . . . . . . . . . . (741) (957) (51)
OPEB Income (Expense)
(a)
. . . . . . . . . . . . . . . . . . . . . . . . . . 15 (72) (20)
Operating Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,368 $ 4,156 $ 5,501
(a)
. . . . . . . . . . . . . . . . ($741) ($957) (51)
Operating Income Excluding Pension
Mark-to-Market Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,109 $ 5,113 $ 5,552
Segment Profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,991 $ 5,879 $ 6,351
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $29,951 $37,665 39,055
Segment Profit Margin % . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.3% 15.6% 16.3%
Operating Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,368 $ 4,156 $ 5,501
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $29,951 $37,665 $39,055
Operating Income Margin %. . . . . . . . . . . . . . . . . . . . . . . . . . 7.9% 11.0% 14.1%
Operating Income Excluding Pension
Mark-to-Market Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,109 $ 5,113 $ 5,552
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $29,951 $37,665 $39,055
Operating Income Margin Excluding Pension
Mark-to-Market Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . 10.4% 13.6% 14.2%
(a) Included in cost of products and services sold and selling, general and administrative
expenses
(b) Includes repositioning, asbestos, environmental expenses and equity income
adjustment
3) Reconciliation Of Cash Provided By Operating Activities To Free Cash Flow And
Calculation Of Free Cash Flow Conversion Percentage
($M)
2004 2005 2006 2007
Cash Provided by Operating Activities. . . . . . . . . . . $2,253 $2,442 $3,211 $3,911
Expenditures for Property, Plant and Equipment . (629) (684) (733) (767)
$1,624 $1,758 $2,478 $3,144
Cash Pension Contributions . . . . . . . . . . . . . . . . . . . . 74 70 296 204
Free Cash Flow. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,698 $1,828 $2,774 $3,348
Net Income Attributable to Honeywell . . . . . . . . . . . $1,442 $1,886 $2,289 $2,594
Pension Mark-to-Market Adjustment,
Net of Tax
(a)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 21 20 9
Net Income Attributable to Honeywell
Excluding Pension Mark-to-Market Adjustment. $1,500 $1,907 $2,309 $2,603
Cash Provided by Operating Activities. . . . . . . . . . . $2,253 $2,442 $3,211 $3,911
Net Income Attributable to Honeywell . . . . . . . . . 1,442 1,886 2,289 2,594
Operating Cash Flow Conversion %. . . . . . . . . . . . . 156% 129% 140% 151%
Free Cash Flow. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,698 $1,828 $2,774 $3,348
Excluding Pension Mark-to-Market Adjustment. 1,500 1,907 2,309 2,603
Free Cash Flow Conversion % . . . . . . . . . . . . . . . . . 113% 96% 120% 129%
(a) Mark-to-market uses a blended tax rate of 30.0%, 32.3%, 28.6% and 30.8% for 2004
through 2007, respectively.
Calculation Of Free Cash Flow Conversion Percentage (Continued)
($M)
2008
Cash Provided by Operating Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,791
Expenditures for Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . (884)
$2,907
Cash Pension Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
Cash Taxes Relating to the Sale of the Consumable Solutions Business . . . 166
Free Cash Flow. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,216
Net Income Attributable to Honeywell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 806
Pension Mark-to-Market Adjustment, Net of Tax
(a)
. . . . . . . . . . . . . . . . . . . . . . . . . 2,033
Excluding Pension Mark-to-Market Adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . $2,839
Net Income Attributable to Honeywell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 806
Operating Cash Flow Conversion % . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 470%
Free Cash Flow. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,216
Excluding Pension Mark-to-Market Adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,839
Free Cash Flow Conversion % . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113%
(a) Mark-to-market uses a blended tax rate of 38.2% in 2008.
($M)
2009 2010 2011 2012
Cash Provided by Operating Activities. . . . . . . . . $3,946 $4,203 $2,833 $3,517
Expenditures for Property, Plant and
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (609) (651) (798) (884)
$3,337 $3,552 $2,035 $2,633
Cash Pension Contributions . . . . . . . . . . . . . . . . . . 265 651 1,745 1,039
Free Cash Flow. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,602 $4,203 $3,780 $3,672
Net Income Attributable to Honeywell . . . . . . . . . $1,548 $2,022 $2,067 $2,926
Pension Mark-to-Market Adjustment, Net of
Tax
(a)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 486 319 1,137 622
Excluding Pension Mark-to-Market
Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,034 $2,341 $3,204 $3,548
Cash Provided by Operating Activities. . . . . . . . . $3,946 $4,203 $2,833 $3,517
Net Income Attributable to Honeywell . . . . . . . 1,548 2,022 2,067 2,926
Operating Cash Flow Conversion %. . . . . . . . . . . 255% 208% 137% 120%
Free Cash Flow. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,602 $4,203 $3,780 $3,672
Excluding Pension Mark-to-Market
Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,034 2,341 3,204 3,548
Free Cash Flow Conversion %. . . . . . . . . . . . . . . . 177% 180% 118% 103%
(a) Mark-to-market uses a blended tax rate of 34.4%, 32.3%, 36.9% and 35.0% for 2009
through 2012, respectively.
($M)
2013
Expenditures for Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . (947)
$3,388
Cash Pension Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
NARCO Trust Establishment Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164
Cash Taxes Relating to the Sale of Available for Sale Investments . . . . . . . . . 100
Free Cash Flow. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,808
Net Income Attributable to Honeywell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,924
Pension Mark-to-Market Adjustment, Net of Tax
(a)
. . . . . . . . . . . . . . . . . . . . . . . . . 38
Excluding Pension Mark-to-Market Adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . $3,962
Net Income Attributable to Honeywell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,924
Operating Cash Flow Conversion % . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110%
Free Cash Flow. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,808
Excluding Pension Mark-to-Market Adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . 3,962
Free Cash Flow Conversion % . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96%
(a) Mark-to-market uses a blended tax rate of 25.5% in 2013.
This letter contains certain statements that may be deemed forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934. All statements,
other than statements of historical fact, that address activities, events or developments that
we or our management intends, expects, projects, believes or anticipates will or may occur in
the future are forward-looking statements. Such statements are based upon certain
assumptions and assessments made by our management in light of their experience and
their perception of historical trends, current economic and industry conditions, expected future
developments and other factors they believe to be appropriate. The forward-looking
statements included in this release are also subject to a number of material risks and
uncertainties, including but not limited to economic, competitive, governmental, and
technological factors affecting our operations, markets, products, services and prices. Such
forward-looking statements are not guarantees of future performance, and actual results,
developments and business decisions may differ from those envisaged by such forward-
looking statements.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2013
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8974
Honeywell International Inc.
(Exact name of registrant as specified in its charter)
Delaware 22-2640650
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
101 Columbia Road
Morris Township, New Jersey 07962
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code (973) 455-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Name of Each Exchange
on Which Registered
Common Stock, par value $1 per share* New York Stock Exchange
Chicago Stock Exchange
9
1
2% Debentures due June 1, 2016 New York Stock Exchange
* The common stock is also listed on the London Stock Exchange.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes No
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of
the Exchange Act. Yes No
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes No
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website,
if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T
( 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of Registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See definition of accelerated filer, large accelerated filer, and smaller
reporting company in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes No
The aggregate market value of the voting stock held by nonaffiliates of the Registrant was approximately
$62.3 billion at June 30, 2013.
There were 784,131,620 shares of Common Stock outstanding at January 24, 2014.
Documents Incorporated by Reference
Part III: Proxy Statement for Annual Meeting of Shareowners to be held April 28, 2014.
TABLE OF CONTENTS
Item Page
Part I 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1A. Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1B. Unresolved Staff Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Part II. 5. Market for Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6. Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7. Managements Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7A. Quantitative and Qualitative Disclosures About Market Risk. . . . . . . . . . . . . . . . . . 58
8. Financial Statements and Supplementary Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
9A. Controls and Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
9B. Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Part III. 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
13. Certain Relationships and Related Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
14. Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
Part IV. 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
PART I.
Item 1. Business
Honeywell International Inc. (Honeywell) is a diversified technology and manufacturing company,
serving customers worldwide with aerospace products and services, control, sensing and security
technologies for buildings, homes and industry, turbochargers, automotive products, specialty
chemicals, electronic and advanced materials, process technology for refining and petrochemicals,
and energy efficient products and solutions for homes, business and transportation. Honeywell was
incorporated in Delaware in 1985.
We maintain an internet website at http://www.honeywell.com. Our Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports,
are available free of charge on our website under the heading Investor Relations (see SEC Filings &
Reports) immediately after they are filed with, or furnished to, the Securities and Exchange
Commission (SEC). In addition, in this Form 10-K, the Company incorporates by reference certain
information from parts of its proxy statement for the 2014 Annual Meeting of Stockholders, which we
expect to file with the SEC on or about March 13, 2014, and which will also be available free of charge
on our website.
Information relating to corporate governance at Honeywell, including Honeywells Code of
Business Conduct, Corporate Governance Guidelines and Charters of the Committees of the Board of
Directors are also available, free of charge, on our website under the heading Investor Relations (see
Corporate Governance), or by writing to Honeywell, 101 Columbia Road, Morris Township, New
Jersey 07962, c/o Vice President and Corporate Secretary. Honeywells Code of Business Conduct
applies to all Honeywell directors, officers (including the Chief Executive Officer, Chief Financial Officer
and Controller) and employees.
Major Businesses
We globally manage our business operations through four businesses that are reported as
operating segments: Aerospace, Automation and Control Solutions, Performance Materials and
Technologies, and Transportation Systems. Financial information related to our operating segments is
included in Note 24 of Notes to Financial Statements in Item 8. Financial Statements and
Supplementary Data.
The major products/services, customers/uses and key competitors of each of our operating
segments follows:
Aerospace
Our Aerospace segment is a leading global provider of integrated avionics, engines, systems and
service solutions for aircraft manufacturers, airlines, business and general aviation, military, space and
airport operations.
Turbine propulsion engines
Major Products/Services Major Customers/Uses Key Competitors
TFE731 turbofan
TFE1042 turbofan
ATF3 turbofan
F125 turbofan
F124 turbofan
ALF502 turbofan
LF507 turbofan
CFE738 turbofan
HTF 7000 turbofan
T53 turboshaft
T55 turboshaft
CTS800 turboshaft
Business, regional, and general
aviation
Commercial helicopters
Military vehicles
Military helicopters
Military trainer
Rolls Royce/Allison
Turbomeca
United Technologies
Williams
1
Turbine propulsion engines
HTS900 turboshaft
LT101 turboshaft
TPE 331 turboprop
AGT1500 turboshaft
Repair, overhaul and spare
parts
Auxiliary power units (APUs)
Airborne auxiliary power units
Jet fuel starters
Secondary power systems
Ground power units
parts
Commercial, regional, business
and military aircraft
Ground power
United Technologies
Environmental control systems
Air management systems:
Air conditioning
Bleed air
Cabin pressure control
Air purification and treatment
Gas Processing
Heat Exchangers
parts
Commercial, regional and
general aviation aircraft
Military aircraft
Ground vehicles
Spacecraft
Auxilec
Barber Colman
Dukes
Eaton-Vickers
General Electric
Liebherr
Pacific Scientific
TAT
United Technologies
Electric power systems
Generators
Power distribution & control
Power conditioning
parts
and military aircraft
Commercial and military
helicopters
Military vehicles
General Electric
Safran
United Technologies
Engine systems accessories
Electronic and hydromechanical
fuel controls
Engine start systems
Electronic engine controls
Sensors
Valves
Electric and pneumatic power
generation systems
Thrust reverser actuation,
pneumatic and electric
Commercial, regional and
Military aircraft
BAE Controls
Parker Hannifin
United Technologies
Avionics, displays, flight guidance and flight management systems
Flight data and cockpit voice
recorders
Integrated avionics systems
Commercial, business and
Government aviation
BAE
Boeing/Jeppesen
Garmin
2
Avionics, displays, flight guidance and flight management systems
Flight management systems
Cockpit display systems
Data management and aircraft
performance monitoring
systems
Aircraft information systems
Network file servers
Wireless network transceivers
Weather information network
Navigation database
information
Cabin management systems
Vibration detection and
monitoring
Mission management systems
Tactical data management
systems
Maintenance and health
monitoring systems
Flight control and autopilot
systems
Military aircraft General Electric
Kaiser
L3
Lockheed Martin
Lufthansa Technik
Northrop Grumman
Rockwell Collins
Thales
Trimble/Terra
United Technologies
Universal Avionics
Universal Weather
Radios, radar, navigation communication, datalink safety systems
Flight safety systems:
Enhanced Ground Proximity
Warning Systems (EGPWS)
Traffic Alert and Collision
Avoidance Systems (TCAS)
Windshear detection systems
Weather radar
Communication, navigation and
surveillance systems:
Navigation and guidance
systems
Global positioning systems
Satellite systems
Commercial, business and
Government aviation
Military aircraft
BAE
Boeing/Jeppesen
Garmin
General Electric
Kaiser
L3
Lockheed Martin
Northrop Grumman
Rockwell Collins
Thales
Trimble/Terra
United Technologies
Universal Avionics
Universal Weather
Aircraft lighting
Interior and exterior aircraft
lighting
Commercial, regional, business,
helicopter and military
aviation aircraft (operators,
OEMs, parts distributors and
MRO service providers)
Hella/United Technologies
LSI
Luminator
Whelen
Inertial sensor
Inertial sensor systems for
guidance, stabilization,
navigation and control
Gyroscopes, accelerometers,
inertial measurement units
and thermal switches
Attitude and heading reference
systems
Military and commercial
vehicles and aircraft
Commercial spacecraft and
launch vehicles
Transportation
Powered, guided munitions
Munitions
Advanced drilling support
Astronautics Kearfott
BAE
GEC
General Electric
L3
KVH
Northrop Grumman
Rockwell
United Technologies
Thales
Sagem
3
Control products
Radar altimeters
Pressure products
Air data products
Thermal switches
Magnetic sensors
Military aircraft
Powered, guided munitions,
UAVs
Commercial applications
aircraft
BAE
Northrop Grumman
Rockwell Collins
Rosemount
United Technologies
Space products and subsystems
Guidance subsystems
Control subsystems
Processing subsystems
Radiation hardened electronics
and integrated circuits
GPS-based range safety
systems
Gyroscopes
Commercial and military
spacecraft
DoD
FAA
NASA
BAE
Ball
Ithaco
L3
Lockheed Martin
Northrop Grumman
Raytheon
Management and technical services
Maintenance/operation and
provision of space systems,
services and facilities
Systems engineering and
integration
Information technology services
Logistics and sustainment
NASA
DoD
FAA
DoE
Local governments
Commercial space ground
segment systems and
services
Bechtel
Boeing
Computer Sciences
Dyncorp
Exelis
Lockheed Martin
Raytheon
SAIC
The Washington Group
United Space Alliance
Landing systems
Wheels and brakes
Wheel and brake repair and
overhaul services
Commercial airline, regional,
business and military aircraft
USAF, DoD, DoE Boeing,
Airbus, Lockheed Martin
Meggitt
Messier-Bugatti
United Technologies
Automation and Control Solutions
Our Automation and Control Solutions segment is a leading global provider of environmental and
combustion controls, sensing controls, security and life safety products and services, scanning and
mobility devices and process automation and building solutions and services for homes, buildings and
industrial facilities.
Environmental and combustion controls; sensing controls
Heating, ventilating and air
conditioning controls and
components for homes and
buildings
Original equipment
manufacturers (OEMs)
Distributors
Contractors
Amphenol
Bosch
Cherry
Danfoss
4
Environmental and combustion controls; sensing controls
Indoor air quality products
including zoning, air cleaners,
humidification, heat and
energy recovery ventilators
Controls plus integrated
electronic systems for
burners, boilers and furnaces
Consumer household products
including humidifiers and
thermostats
Electrical devices and switches
Water controls
Sensors, measurement, control
and industrial components
Energy demand/response
management products and
services
Retailers
System integrators
Commercial customers and
homeowners served by the
distributor, wholesaler,
contractor retail and utility
channels
Package and materials
handling operations
Appliance manufacturers
Transportation companies
Aviation companies
Food and beverage processors
Medical equipment
Heat treat processors
Computer and business
equipment manufacturers
Eaton
Emerson
Endress & Hauser
Freescale Semiconductor
Holmes
Invensys
Johnson Controls
Omron
Schneider
Siemens
United Technologies
Yamatake
Measurement Specialties
Security and life safety products and services
Security products and home
control systems
Fire products and systems
Connected home solutions
Access controls and closed
circuit television
Home health monitoring and
nurse contractor, retail and
utility call systems
Gas and radiation detection
products and systems
Emergency lighting
Distribution
Personal protection equipment
OEMs
Retailers
Distributors
Commercial customers and
homeowners served by the
distributor, wholesaler,
channels
Health care organizations
Security monitoring service
providers
Industrial, fire service, utility
distributors, data centers and
telecommunication companies
and U.S. Government
Alarm.com
AT&T
Axis Communications
Bosch
Comcast
Draeger
Hikvision
Hubbell Inc
Mine Safety Appliances
Schneider
Phillips
Riken Keiki
Siemens
Tyco
Tri Ed/Northern Video
Distribution
United Technologies
2Gig/Nortek
3M
Scanning and mobility
Hand held and hands free
image and laser based bar
code scanners
Scan engines
Rugged mobile and wireless
computers for use in hand
held and vehicle mount
applications
Voice Solutions
Industrial, desktop and mobile
printers and printer media
RFID tags, readers and
hardware solutions
After-market and mobility
managed services
OEMs
Retailers
Distributors
Governmental agencies
Commercial customers served
by the transportation and
logistics, manufacturing,
healthcare and retail,
warehousing and ports
industries
Bluebird Soft
Code Corporation
Datalogic
Iridium Vars
Lucas
Motorola Solutions
Skywave
Tsi
Voxware
Zebra
5
Scanning and mobility
Satellite tracking hardware,
airtime services and
applications
Security, logistics, maritime
customers for:
the tracking of vehicles,
containers, ships, and
personnel in remote
environments
Search & Rescue ground
stations system software
National organizations that
monitor distress signals from
aircraft, ships and individuals
typically military branches
and coast guards
Process automation products and solutions
Advanced control software and
industrial automation systems
for control and monitoring of
continuous, batch and hybrid
operations
Production management
software
Communications systems for
Industrial Control equipment
and systems
Consulting, networking
engineering and installation
Terminal automation solutions
Process control instrumentation
Field instrumentation
Analytical instrumentation
Recorders and controllers
Critical environment control
solutions and services
Aftermarket maintenance,
repair and upgrade
Gas control, measurement and
analyzing equipment
Refining and petrochemical
companies
Chemical manufacturers
Oil and gas producers
Food and beverage processors
Pharmaceutical companies
Utilities
Film and coated producers
Pulp and paper industry
Continuous web producers in
the paper, plastics, metals,
rubber, non-wovens and
printing industries
Mining and mineral industries
ABB
AspenTech
Emerson
Invensys
Siemens
Yokogawa
Building solutions and services
HVAC and building control
solutions and services
Energy management solutions
and services, including
demand response and
automation
Security and asset
management solutions and
services
Enterprise building integration
solutions
Building information services
Airport lighting and systems,
visual docking guidance
systems
Building managers and owners
Contractors, architects and
developers
Consulting engineers
Security directors
Plant managers
Utilities
Large global corporations
Public school systems
Universities
Local governments
Public housing agencies
Airports
Ameresco
Chevron
Invensys
Johnson Controls
Local contractors and utilities
Safegate
Schneider
Siemens
Trane
Thorn
United Technologies
6
Performance Materials and Technologies
Our Performance Materials and Technologies segment is a global leader in providing customers
with leading technologies and high-performance materials, including hydrocarbon processing
technologies, catalysts, adsorbents, equipment and services, fluorine products, specialty films and
additives, advanced fibers and composites, intermediates, specialty chemicals, electronic materials
and chemicals.
Resins & chemicals
Nylon 6 polymer
Caprolactam
Ammonium sulfate
Phenol
Acetone
Cyclohexanone
MEKO
Nylon for carpet fibers,
engineered resins and flexible
packaging
Fertilizer
Resins - Phenolic, Epoxy,
Polycarbonate
Solvents
Chemical intermediates
Paints, Coatings, Laquers
BASF
DSM
INEOS
Mitsui
Polimeri
Sinopec
UBE
Shell
Hydrofluoric acid (HF)
Anhydrous and aqueous
hydrofluoric acid
Fluorochemicals
Metals processing
Oil refining
Chemical intermediates
Semiconductors Photovoltaics
Mexichem Fluor
Solvay
Fluorochemicals
Refrigerants, aerosol and
insulation foam blowing
agents
Solstice refrigerants, blowing
agents, aersols and solvents
Oxyfume sterilant gases
Enovate 3000 blowing agent
for refrigeration insulation
Refrigeration
Stationary air conditioning
Automotive air conditioning
Polyurethane foam
Precision cleaning
Optical
Appliances
Hospitals
Medical equipment
Manufacturers
Asahi
Arkema
Daikin
Dupont
Mexichem Fluor
Sinochem
Solvay
3M
Nuclear services
UF6 conversion services Nuclear fuel
Electric utilities
Cameco
Areva
Rosatom
Research and fine chemicals
Oxime-based fine chemicals
Fluoroaromatics
High-purity solvents
Agrichemicals
Biotech
Avecia
Degussa
DSM
E. Merck
Lonza
Thermo Fisher Scientific
Sigma-Aldrich
7
Performance chemicals, Imaging chemicals, Chemical processing sealants
HF derivatives
Fluoroaromatics
Catalysts
Diverse by product type Atotech
BASF
DSM
Advanced fibers & composites
High modulus polyethylene
fiber and shield composites
Aramid shield composites
Bullet resistant vests, helmets
and other armor applications
Cut-resistant gloves
Rope & cordage
DuPont
DSM
Teijin
Healthcare and packaging
Cast nylon film
Bi-axially oriented nylon film
Fluoropolymer film
Food and pharmaceutical
packaging
American Biaxis
CFP
Daikin
Kolon
Unitika
Specialty additives
Polyethylene waxes
Paraffin waxes and blends
PVC lubricant systems
Processing aids
Luminescent pigments
Adhesives
Coatings and inks
PVC pipe, siding & profiles
Plastics
Reflective coatings
Safety & security applications
BASF
Clariant
Westlake
Electronic chemicals
Ultra high-purity HF
Inorganic acids
Hi-purity solvents
Semiconductors
Photovoltaics
BASF
KMG
Semiconductor materials and services
Interconnect-dielectrics
Interconnect-metals
Semiconductor packaging
materials
Advanced polymers
Anti-reflective coatings
Thermo-couples
Semiconductors
Microelectronics
Telecommunications
BASF
Brewer
Dow
Nikko
Praxair
Shinko
Tosoh
8
Catalysts, adsorbents and specialties
Catalysts
Molecular sieves
Adsorbents
Aluminas
Customer catalyst
manufacturing
Petroleum, refining,
petrochemical industry, gas
processing industry and
home, automotive, steel and
medical manufacturing
industries
Axens
Albemarle
Chevron
Exxon-MobilHaldor Topsoe
Johnson Matthey
Shell/Criterion
Sinopec
SK
WR Grace
Process technology and equipment
Technology licensing and
engineering design of
process units and systems
Engineered products
Proprietary equipment
Training and development of
technical personnel
Petroleum refining,
petrochemical
Axens
Chevron Lummus
Global
Chicago Bridge & Iron
Exxon-Mobil
Koch Glitsch
Linde AG
Natco
Technip
Sinopec
Shell/SGS
Renewable fuels and chemicals
Technology licensing of
Process, catalysts, absorbents,
Refining equipment and
services for producing
renewable-based fuels and
chemicals
Military, refining, fuel oil, power
production
Dynamotive
Haldor Topsoe
Kior
Lurgi
Neste Oy
Syntroleum
Gas processing and hydrogen
Design, engineer, manufacture
and install natural gas
processing hydrogen
separation plants
Gas processing and hydrogen
separation
Cameron
General Electric
Exterran
Linde AG
Lurgi
Optimized Process Design
Proquip
PWA-Prosep
9
Transportation Systems
Our Transportation Systems segment is one of the leading manufacturers of engine boosting
systems for passenger cars and commercial vehicles, as well as a leading provider of braking
products.
Charge-air systems
Turbochargers for gasoline,
diesel, CNG, LPG
Passenger car, truck and
off-highway OEMs
Engine manufacturers
Aftermarket distributors and
dealers
Borg-Warner
Cummins Holset
IHI
MHI
Bosch Mahle
Continental
Thermal systems
Exhaust gas coolers
Charge-air coolers
Aluminum radiators
Aluminum cooling modules
Passenger car, truck and
off-highway OEMs
Engine manufacturers
Aftermarket distributors and
dealers
Behr
Modine
Valeo
Brake hard parts and other friction materials
Disc brake pads and shoes
Drum brake linings
Brake blocks
Disc and drum brake
components
Brake hydraulic components
Brake fluid
Aircraft brake linings
Railway linings
Automotive and heavy vehicle
OEMs, OES, brake
manufacturers and
aftermarket channels
Installers
Railway and
commercial/military aircraft
OEMs and brake
manufacturers
Akebono
Continental
Federal-Mogul
ITT Corp
JBI
Nisshinbo
TRW
Aerospace Sales
Our sales to aerospace customers were 31, 32, and 31 percent of our total sales in 2013, 2012
and 2011, respectively. Our sales to commercial aerospace original equipment manufacturers were 7,
7, and 6 percent of our total sales in 2013, 2012 and 2011, respectively. In addition, our sales to
commercial aftermarket customers of aerospace products and services were 11, 12, and 11 percent of
our total sales in 2013, 2012 and 2011. Our Aerospace results of operations can be impacted by
various industry and economic conditions. See Item 1A. Risk Factors.
U.S. Government Sales
Sales to the U.S. Government (principally by our Aerospace segment), acting through its various
departments and agencies and through prime contractors, amounted to $3,856, $4,109 and $4,276
million in 2013, 2012 and 2011, respectively, which included sales to the U.S. Department of Defense,
as a prime contractor and subcontractor, of $3,066, $3,273 and $3,374 million in 2013, 2012 and 2011,
respectively. U.S. defense spending decreased in 2013 compared to 2012. Due to anticipated lower
U.S. Government spending levels mandated by the Budget Control Act (sequestration), we expect a
slight decline in our defense and space revenue in 2014. We do not expect our overall operating
results to be significantly affected by any proposed changes in 2014 federal defense spending due
principally to the varied mix of the government programs which impact us (OEM production,
engineering development programs, aftermarket spares and repairs and overhaul programs), increases
in direct foreign defense and space market sales, as well as our diversified commercial businesses.
10
Our contracts with the U.S. Government are subject to audits, investigations, and termination by the
government. See Item 1A. Risk Factors.
Backlog
Our total backlog at December 31, 2013 and 2012 was $16,523 and $16,307 million, respectively.
We anticipate that approximately $12,262 million of the 2013 backlog will be filled in 2014. We believe
that backlog is not necessarily a reliable indicator of our future sales because a substantial portion of
the orders constituting this backlog may be canceled at the customers option.
Competition
We are subject to active competition in substantially all product and service areas. Competition is
expected to continue in all geographic regions. Competitive conditions vary widely among the
thousands of products and services provided by us, and vary by country. Our businesses compete on
a variety of factors, such as price, quality, reliability, delivery, customer service, performance, applied
technology, product innovation and product recognition. Brand identity, service to customers and
quality are important competitive factors for our products and services, and there is considerable price
competition. Other competitive factors include breadth of product line, research and development
efforts and technical and managerial capability. While our competitive position varies among our
products and services, we believe we are a significant competitor in each of our major product and
service classes. A number of our products and services are sold in competition with those of a large
number of other companies, some of which have substantial financial resources and significant
technological capabilities. In addition, some of our products compete with the captive component
divisions of original equipment manufacturers. See Item 1A Risk Factors for further discussion.
International Operations
We are engaged in manufacturing, sales, service and research and development globally. U.S.
exports and foreign manufactured products are significant to our operations. U.S. exports comprised
14, 14 and 12 percent of our total sales in 2013, 2012 and 2011, respectively. Foreign manufactured
products and services, mainly in Europe and Asia, were 41, 41 and 43 percent of our total sales in
2013, 2012 and 2011, respectively.
Approximately 23 percent of total 2013 sales of Aerospace-related products and services were
exports of U.S. manufactured products and systems and performance of services such as aircraft
repair and overhaul. Exports were principally made to Europe, Asia, Canada, and Latin America.
Foreign manufactured products and systems and performance of services comprised approximately
16 percent of total 2013 Aerospace sales. The principal manufacturing facilities outside the U.S. are in
Europe, with less significant operations in Canada and Asia.
Approximately 3 percent of total 2013 sales of Automation and Control Solutions products and
services were exports of U.S. manufactured products. Foreign manufactured products and
performance of services accounted for 57 percent of total 2013 Automation and Control Solutions
sales. The principal manufacturing facilities outside the U.S. are in Europe and Asia, with less
significant operations in Canada and Australia.
Approximately 30 percent of total 2013 sales of Performance Materials and Technologies products
and services were exports of U.S. manufactured products. Exports were principally made to Asia and
Latin America. Foreign manufactured products and performance of services comprised 23 percent of
total 2013 Performance Materials and Technologies sales. The principal manufacturing facilities
outside the U.S. are in Europe and Asia.
Approximately 4 percent of total 2013 sales of Transportation Systems products were exports of
U.S. manufactured products. Foreign manufactured products accounted for 84 percent of total 2013
sales of Transportation Systems. The principal manufacturing facilities outside the U.S. are in Europe,
with less significant operations in Asia.
11
Financial information including net sales and long-lived assets related to geographic areas is
included in Note 25 of Notes to Financial Statements in Item 8. Financial Statements and
Supplementary Data. Information regarding the economic, political, regulatory and other risks
associated with international operations is included in Item 1A. Risk Factors.
Raw Materials
The principal raw materials used in our operations are generally readily available. Although we
occasionally experience disruption in raw materials supply, we experienced no significant problems in
the purchase of key raw materials and commodities in 2013. We are not dependent on any one
supplier for a material amount of our raw materials, except related to R240 (a key component in foam
blowing agents), a raw material used in our Performance Materials and Technologies segment.
The costs of certain key raw materials, including cumene, fluorspar, R240, natural gas,
perchloroethylene, sulfur and ethylene in our Performance Materials and Technologies business,
nickel, steel and other metals in our Transportation Systems business, and nickel, titanium and other
metals in our Aerospace business, are expected to continue to fluctuate. We will continue to attempt to
offset raw material cost increases with formula or long-term supply agreements, price increases and
hedging activities where feasible. We do not presently anticipate that a shortage of raw materials will
cause any material adverse impacts during 2014. See Item 1A. Risk Factors for further discussion.
Patents, Trademarks, Licenses and Distribution Rights
Our segments are not dependent upon any single patent or related group of patents, or any
licenses or distribution rights. We own, or are licensed under, a large number of patents, patent
applications and trademarks acquired over a period of many years, which relate to many of our
products or improvements to those products and which are of importance to our business. From time
to time, new patents and trademarks are obtained, and patent and trademark licenses and rights are
acquired from others. We also have distribution rights of varying terms for a number of products and
services produced by other companies. In our judgment, those rights are adequate for the conduct of
our business. We believe that, in the aggregate, the rights under our patents, trademarks and licenses
are generally important to our operations, but we do not consider any patent, trademark or related
group of patents, or any licensing or distribution rights related to a specific process or product, to be of
material importance in relation to our total business. See Item 1A. Risk Factors for further discussion.
We have registered trademarks for a number of our products and services, including Honeywell,
Aclar, Ademco, Bendix, BW, Callidus, Enovate, Esser, Fire-Lite, Garrett, Genetron, Gent, Howard
Leight, Intermec, Jurid, Matrikon, Maxon, MK, North, Notifier, Novar, Oleflex, Parex, RAE Systems,
RMG, Silent Knight, Solstice, Spectra, System Sensor, Trend, Tridium and UOP.
Research and Development
Our research activities are directed toward the discovery and development of new products,
technologies and processes, and the development of new uses for existing products and software
applications. The Companys principal research and development activities are in the U.S., India,
Europe and China.
Research and development (R&D) expense totaled $1,804, $1,847 and $1,799 million in 2013,
2012 and 2011, respectively. The decrease in R&D expense of 2 percent in 2013 compared to 2012
was primarily due to lower pension (primarily due to the absence of U.S. pension mark-to-market
adjustment in 2013) and other postretirement expenses, partially offset by the increased expenditures
for new product development in our Automation and Control Solutions and Performance Materials
Technologies segments. The increase in R&D expense of 3 percent in 2012 compared to 2011 was
mainly due to increased expenditures on the development of new technologies to support existing and
new aircraft platforms in our Aerospace segment and new product development in our Automation and
Control Solutions and Performance Materials Technologies segments. R&D as a percentage of sales
was 4.6, 4.9 and 4.9 percent in 2013, 2012 and 2011, respectively. Customer-sponsored (principally
12
the U.S. Government) R&D activities amounted to an additional $969, $835 and $867 million in 2013,
2012 and 2011, respectively.
Environment
We are subject to various federal, state, local and foreign government requirements regulating the
discharge of materials into the environment or otherwise relating to the protection of the environment. It
is our policy to comply with these requirements, and we believe that, as a general matter, our policies,
practices and procedures are properly designed to prevent unreasonable risk of environmental
damage, and of resulting financial liability, in connection with our business. Some risk of environmental
damage is, however, inherent in some of our operations and products, as it is with other companies
engaged in similar businesses.
We are and have been engaged in the handling, manufacture, use and disposal of many
substances classified as hazardous by one or more regulatory agencies. We believe that, as a general
matter, our policies, practices and procedures are properly designed to prevent unreasonable risk of
environmental damage and personal injury, and that our handling, manufacture, use and disposal of
these substances are in accord with environmental and safety laws and regulations. It is possible,
however, that future knowledge or other developments, such as improved capability to detect
substances in the environment or increasingly strict environmental laws and standards and
enforcement policies, could bring into question our current or past handling, manufacture, use or
disposal of these substances.
Among other environmental requirements, we are subject to the federal superfund and similar
state and foreign laws and regulations, under which we have been designated as a potentially
responsible party that may be liable for cleanup costs associated with current and former operating
sites and various hazardous waste sites, some of which are on the U.S. Environmental Protection
Agencys Superfund priority list. Although, under some court interpretations of these laws, there is a
possibility that a responsible party might have to bear more than its proportional share of the cleanup
costs if it is unable to obtain appropriate contribution from other responsible parties, to date we have
not had to bear significantly more than our proportional share in multi-party situations taken as a whole.
We do not believe that existing or pending climate change legislation, regulation, or international
treaties or accords are reasonably likely to have a material effect in the foreseeable future on the
Companys business or markets that it serves, nor on its results of operations, capital expenditures or
financial position. We will continue to monitor emerging developments in this area.
Further information, including the current status of significant environmental matters and the
financial impact incurred for remediation of such environmental matters, if any, is included in Item 7.
Managements Discussion and Analysis of Financial Condition and Results of Operations, in Note 22
Commitments and Contingencies of Notes to Financial Statements in Item 8. Financial Statements
and Supplementary Data, and in Item 1A. Risk Factors.
Employees
We have approximately 131,000 employees at December 31, 2013, of which approximately
51,000 were located in the United States.
13
Item 1A. Risk Factors
Cautionary Statement about Forward-Looking Statements
We have described many of the trends and other factors that drive our business and future results
in Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations,
including the overview of the Company and each of our segments and the discussion of their
respective economic and other factors and areas of focus for 2014. These sections and other parts of
this report (including this Item 1A) contain forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934.
Forward-looking statements are those that address activities, events or developments that
management intends, expects, projects, believes or anticipates will or may occur in the future. They
are based on managements assumptions and assessments in light of past experience and trends,
current economic and industry conditions, expected future developments and other relevant factors.
They are not guarantees of future performance, and actual results, developments and business
decisions may differ significantly from those envisaged by our forward-looking statements. We do not
undertake to update or revise any of our forward-looking statements. Our forward-looking statements
are also subject to risks and uncertainties that can affect our performance in both the near-and long-
term. These forward-looking statements should be considered in light of the information included in this
Form 10-K, including, in particular, the factors discussed below.
Risk Factors
Our business, operating results, cash flows and financial condition are subject to the risks and
uncertainties set forth below, any one of which could cause our actual results to vary materially from
recent results or from our anticipated future results.
Industry and economic conditions may adversely affect the markets and operating
conditions of our customers, which in turn can affect demand for our products and services
and our results of operations.
The operating results of our segments are impacted by general global industry and economic
conditions that can cause changes in spending and capital investment patterns, demand for our
products and services and the level of our manufacturing and shipping costs. The operating results of
our Aerospace segment, which generated 31 percent of our consolidated revenues in 2013, are directly
tied to cyclical industry and economic conditions, including global demand for air travel as reflected in
new aircraft production, the deferral or cancellation of orders for new aircraft, delays in launch
schedules for new aircraft platforms, the retirement of aircraft, global flying hours, and business and
general aviation aircraft utilization rates, as well as changes in customer buying patterns with respect
to aftermarket parts, supplier consolidation, factory transitions, capacity constraints, and the level and
mix of U.S. and foreign government appropriations for defense and space programs (as further
discussed in other risk factors below). The challenging operating environment faced by the commercial
airline industry may be influenced by a wide variety of factors including global flying hours, aircraft fuel
prices, labor issues, airline consolidation, airline insolvencies, terrorism and safety concerns as well as
changes in regulations. Future terrorist actions or pandemic health issues could dramatically reduce
both the demand for air travel and our Aerospace aftermarket sales and margins. The operating results
of our Automation and Control Solutions (ACS) segment, which generated 42 percent of our
consolidated revenues in 2013, are impacted by the level of global residential and commercial
construction (including retrofits and upgrades), capital spending and operating expenditures on building
and process automation, industrial plant capacity utilization and expansion, inventory levels in
distribution channels, and global economic growth rates. Performance Materials and Technologies
operating results, which generated 17 percent of our consolidated revenues in 2013, are impacted by
global economic growth rates, capacity utilization for chemical, industrial, refining, petrochemical and
semiconductor plants, our customers availability of capital for refinery construction and expansion, and
raw material demand and supply volatility. Transportation Systems operating results, which generated
10 percent of our consolidated revenues in 2013, are impacted by global production and demand for
14
automobiles and trucks equipped with turbochargers, and regulatory changes regarding automobile
and truck emissions and fuel economy, delays in launch schedules for new automotive platforms, and
consumer demand and spending for automotive aftermarket products. Demand of global automotive
and truck manufacturers will continue to be influenced by a wide variety of factors, including ability of
consumers to obtain financing, ability to reduce operating costs and overall consumer and business
confidence. Each of the segments is impacted by volatility in raw material prices (as further described
below) and non-material inflation.
Raw material price fluctuations, the ability of key suppliers to meet quality and delivery
requirements, or catastrophic events can increase the cost of our products and services,
impact our ability to meet commitments to customers and cause us to incur significant
liabilities.
The cost of raw materials is a key element in the cost of our products, particularly in our
Performance Materials and Technologies (cumene, fluorspar, R240, natural gas, perchloroethylene,
sulfur and ethylene), Transportation Systems (nickel, steel and other metals) and Aerospace (nickel,
titanium and other metals) segments. Our inability to offset material price inflation through increased
prices to customers, formula or long-term fixed price contracts with suppliers, productivity actions or
through commodity hedges could adversely affect our results of operations.
Our manufacturing operations are also highly dependent upon the delivery of materials (including
raw materials) by outside suppliers and their assembly of major components, and subsystems used in
our products in a timely manner and in full compliance with purchase order terms and conditions,
quality standards, and applicable laws and regulations. In addition, many major components, product
equipment items and raw materials are procured or subcontracted on a single-source basis with a
number of domestic and foreign companies; in some circumstances these suppliers are the sole
source of the component or equipment. Although we maintain a qualification and performance
surveillance process to control risk associated with such reliance on third parties and we believe that
sources of supply for raw materials and components are generally adequate, it is difficult to predict
what effects shortages or price increases may have in the future. Our ability to manage inventory and
meet delivery requirements may be constrained by our suppliers inability to scale production and
adjust delivery of long-lead time products during times of volatile demand. Our suppliers may fail to
perform according to specifications as and when required and we may be unable to identify alternate
suppliers or to otherwise mitigate the consequences of their non-performance. The supply chains for
our businesses could also be disrupted by suppliers decisions to exit certain businesses, bankruptcy
and by external events such as natural disasters, extreme weather events, pandemic health issues,
terrorist actions, labor disputes, governmental actions and legislative or regulatory changes (e.g.,
product certification or stewardship requirements, sourcing restrictions, product authenticity, climate
change or greenhouse gas emission standards, etc.). Our inability to fill our supply needs would
jeopardize our ability to fulfill obligations under commercial and government contracts, which could, in
turn, result in reduced sales and profits, contract penalties or terminations, and damage to customer
relationships. Transitions to new suppliers may result in significant costs and delays, including those
related to the required recertification of parts obtained from new suppliers with our customers and/or
regulatory agencies. In addition, because our businesses cannot always immediately adapt their cost
structure to changing market conditions, our manufacturing capacity for certain products may at times
exceed or fall short of our production requirements, which could adversely impact our operating costs,
profitability and customer and supplier relationships.
Our facilities, distribution systems and information technology systems are subject to catastrophic
loss due to, among other things, fire, flood, terrorism or other natural or man-made disasters. If any of
these facilities or systems were to experience a catastrophic loss, it could disrupt our operations, result
in personal injury or property damage, damage relationships with our customers and result in large
expenses to repair or replace the facilities or systems, as well as result in other liabilities and adverse
impacts. The same risk could also arise from the failure of critical systems supplied by Honeywell to
large industrial, refining and petrochemical customers.
15
Failure to increase productivity through sustainable operational improvements, as well as an
inability to successfully execute repositioning projects, may reduce our profitability or
adversely impact our businesses
Our profitability and margin growth are dependent upon our ability to drive sustainable
improvements through the Honeywell Enablers. In addition, we seek productivity and cost savings
benefits through repositioning actions and projects, such as consolidation of manufacturing facilities,
transitions to cost-competitive regions and product line rationalizations. Risks associated with these
actions include delays in execution of the planned initiatives, additional unexpected costs, adverse
effects on employee morale and the failure to meet operational targets due to employee attrition. Many
of the restructuring actions are complex and difficult to implement. Hence, we may not realize the full
operational or financial benefits we expected, the recognition of these benefits may be delayed and
these actions may potentially disrupt our operations. See Note 3 Repositioning and Other Charges of
Notes to the Financial Statements in Item 8. Financial Statements and Supplementary Data for a
summary of our repositioning actions.
Our future growth is largely dependent upon our ability to develop new technologies that
achieve market acceptance with acceptable margins.
Our businesses operate in global markets that are characterized by rapidly changing technologies
and evolving industry standards. Accordingly, our future growth rate depends upon a number of
factors, including our ability to (i) identify emerging technological trends in our target end-markets, (ii)
develop and maintain competitive products, (iii) enhance our products by adding innovative features
that differentiate our products from those of our competitors and prevent commoditization of our
products, (iv) develop, manufacture and bring products to market quickly and cost-effectively, and (v)
develop and retain individuals with the requisite expertise.
Our ability to develop new products based on technological innovation can affect our competitive
position and requires the investment of significant resources. These development efforts divert
resources from other potential investments in our businesses, and they may not lead to the
development of new technologies or products on a timely basis or that meet the needs of our
customers as fully as competitive offerings. In addition, the markets for our products may not develop
or grow as we currently anticipate. The failure of our technologies or products to gain market
acceptance due to more attractive offerings by our competitors could significantly reduce our revenues
and adversely affect our competitive standing and prospects.
Protecting our intellectual property is critical to our innovation efforts.
We own or are licensed under a large number of U.S. and non-U.S. patents and patent
applications, trademarks and copyrights. Our intellectual property rights may expire or be challenged,
invalidated or infringed upon by third parties or we may be unable to maintain, renew or enter into new
licenses of third party proprietary intellectual property on commercially reasonable terms. In some non-
U.S. countries, laws affecting intellectual property are uncertain in their application, which can affect
the scope or enforceability of our patents and other intellectual property rights. Any of these events or
factors could diminish or cause us to lose the competitive advantages associated with our intellectual
property, subject us to judgments, penalties and significant litigation costs, and/or temporarily or
permanently disrupt our sales and marketing of the affected products or services.
Cybersecurity incidents could disrupt business operations, result in the loss of critical and
confidential information, and adversely impact our reputation and results of operations.
Global cybersecurity threats and incidents can range from uncoordinated individual attempts to
gain unauthorized access to information technology (IT) systems to sophisticated and targeted
measures known as advanced persistent threats, directed at the Company and/or its third party service
providers. While we have experienced, and expect to continue to experience, these types of threats
and incidents, none of them to date have been material to the Company. Although we employ
comprehensive measures to prevent, detect, address and mitigate these threats (including access
16
controls, data encryption, vulnerability assessments, continuous monitoring of our IT networks and
systems and maintenance of backup and protective systems), cybersecurity incidents, depending on
their nature and scope, could potentially result in the misappropriation, destruction, corruption or
unavailability of critical data and confidential or proprietary information (our own or that of third parties)
and the disruption of business operations. The potential consequences of a material cybersecurity
incident include reputational damage, litigation with third parties, diminution in the value of our
investment in research, development and engineering, and increased cybersecurity protection and
remediation costs, which in turn could adversely affect our competitiveness and results of operations.
An increasing percentage of our sales and operations is in non-U.S. jurisdictions and is
subject to the economic, political, regulatory and other risks of international operations.
Our international operations, including U.S. exports, comprise a growing proportion of our
operating results. Our strategy calls for increasing sales to and operations in overseas markets,
including developing markets such as China, India, the Middle East and other high growth regions.
In 2013, approximately 55 percent of our total sales (including products manufactured in the U.S.
and sold outside the U.S. as well as products manufactured in international locations) were outside of
the U.S. including approximately 29 percent in Europe and approximately 13 percent in Asia. Risks
related to international operations include exchange control regulations, wage and price controls,
employment regulations, foreign investment laws, import, export and other trade restrictions (such as
embargoes), changes in regulations regarding transactions with state-owned enterprises, nationaliza-
tion of private enterprises, government instability, acts of terrorism, and our ability to hire and maintain
qualified staff and maintain the safety of our employees in these regions. We are also subject to U.S.
laws prohibiting companies from doing business in certain countries, or restricting the type of business
that may be conducted in these countries. The cost of compliance with increasingly complex and often
conflicting regulations worldwide can also impair our flexibility in modifying product, marketing, pricing
or other strategies for growing our businesses, as well as our ability to improve productivity and
maintain acceptable operating margins.
With more than half of the Companys sales generated internationally, global economic conditions
can have a significant impact on our total sales. Uncertain global economic conditions arising from a
tepid recovery in the Euro zone and varying rates of growth in emerging regions could reduce
customer confidence that results in decreased demand for our products and services, disruption in
payment patterns and higher default rates, a tightening of credit markets (see risk factor below
regarding volatility of credit markets for further discussion) and increased risk regarding supplier
performance. Volatility in exchange rates of emerging market currencies present uncertainties that
complicate planning and could unexpectedly impact our profitability, presenting increased counterparty
risk with respect to the financial institutions with whom we do business. While we employ
comprehensive controls regarding global cash management to guard against cash or investment loss
and to ensure our ability to fund our operations and commitments, a material disruption to the financial
institutions with whom we transact business could expose Honeywell to financial loss.
Sales and purchases in currencies other than the US dollar expose us to fluctuations in foreign
currencies relative to the US dollar and may adversely affect our results of operations. Currency
fluctuations may affect product demand and prices we pay for materials, as a result, our operating
margins may be negatively impacted. Fluctuations in exchange rates may give rise to translation gains
or losses when financial statements of our non-U.S. businesses are translated into U.S. dollars. While
we monitor our exchange rate exposures and seek to reduce the risk of volatility through hedging
activities, such activities bear a financial cost and may not always be available to us or successful in
significantly mitigating such volatility.
Volatility of credit markets or macro-economic factors could adversely affect our business.
Changes in U.S. and global financial and equity markets, including market disruptions, limited
liquidity, and interest rate volatility, may increase the cost of financing as well as the risks of refinancing
maturing debt. In addition, our borrowing costs can be affected by short and long-term ratings assigned
by independent rating agencies. A decrease in these ratings could increase our cost of borrowing.
17
Delays in our customers ability to obtain financing, or the unavailability of financing to our
customers, could adversely affect our results of operations and cash flow. The inability of our suppliers
to obtain financing could result in the need to transition to alternate suppliers, which could result in
significant incremental cost and delay, as discussed above. Lastly, disruptions in the U.S. and global
financial markets could impact the financial institutions with which we do business.
We may be required to recognize impairment charges for our long-lived assets or available
for sale investments.
At December 31, 2013, the net carrying value of long-lived assets (property, plant and equipment,
goodwill and other intangible assets) and available for sale securities totaled approximately $20.8
billion and $0.8 billion, respectively. In accordance with generally accepted accounting principles, we
periodically assess these assets to determine if they are impaired. Significant negative industry or
economic trends, disruptions to our business, unexpected significant changes or planned changes in
use of the assets, divestitures and market capitalization declines may result in impairments to goodwill
and other long-lived assets. An other than temporary decline in the market value of our available for
sale securities may also result in an impairment charge. Future impairment charges could significantly
affect our results of operations in the periods recognized. Impairment charges would also reduce our
consolidated shareowners equity and increase our debt-to-total-capitalization ratio, which could
negatively impact our credit rating and access to the public debt and equity markets.
A change in the level of U.S. Government defense and space funding or the mix of
programs to which such funding is allocated could adversely impact Aerospaces defense
and space sales and results of operations.
Sales of our defense and space-related products and services are largely dependent upon
government budgets, particularly the U.S. defense budget. Sales as a prime contractor and
subcontractor to the U.S. Department of Defense comprised approximately 25 percent and 8 percent
of Aerospace and total sales, respectively, for the year ended December 31, 2013. We cannot predict
the extent to which total funding and/or funding for individual programs will be included, increased or
reduced as part of the 2014 and subsequent budgets ultimately approved by Congress, or be included
in the scope of separate supplemental appropriations. We also cannot predict the impact of potential
changes in priorities due to military transformation and planning and/or the nature of war-related
activity on existing, follow-on or replacement programs. A shift in defense or space spending to
programs in which we do not participate and/or reductions in funding for or termination of existing
programs could adversely impact our results of operations.
As a supplier of military and other equipment to the U.S. Government, we are subject to
unusual risks, such as the right of the U.S. Government to terminate contracts for
convenience and to conduct audits and investigations of our operations and performance.
In addition to normal business risks, companies like Honeywell that supply military and other
equipment to the U.S. Government are subject to unusual risks, including dependence on
Congressional appropriations and administrative allotment of funds, changes in governmental
procurement legislation and regulations and other policies that reflect military and political
developments, significant changes in contract requirements, complexity of designs and the rapidity
with which they become obsolete, necessity for frequent design improvements, intense competition for
U.S. Government business necessitating increases in time and investment for design and
development, difficulty of forecasting costs and schedules when bidding on developmental and highly
sophisticated technical work, and other factors characteristic of the industry, such as contract award
protests and delays in the timing of contract approvals. Changes are customary over the life of U.S.
Government contracts, particularly development contracts, and generally result in adjustments to
contract prices and schedules.
Our contracts with the U.S. Government are also subject to various government audits. Like many
other government contractors, we have received audit reports that recommend downward price
adjustments to certain contracts or changes to certain accounting systems or controls to comply with
18
various government regulations. When appropriate and prudent, we have made adjustments and paid
voluntary refunds in the past and may do so in the future.
U.S. Government contracts are subject to termination by the government, either for the
convenience of the government or for our failure to perform consistent with the terms of the
applicable contract. In the case of a termination for convenience, we are typically entitled to
reimbursement for our allowable costs incurred, plus termination costs and a reasonable profit. If a
contract is terminated by the government for our failure to perform we could be liable for reprocurement
costs incurred by the government in acquiring undelivered goods or services from another source and
for other damages suffered by the government as permitted under the contract.
We are also subject to government investigations of business practices and compliance with
government procurement regulations. If, as a result of any such investigation or other government
investigations (including violations of certain environmental or export laws), Honeywell or one of its
businesses were found to have violated applicable law, it could be suspended from bidding on or
receiving awards of new government contracts, suspended from contract performance pending the
completion of legal proceedings and/or have its export privileges suspended. The U.S. Government
also reserves the right to debar a contractor from receiving new government contracts for fraudulent,
criminal or other egregious misconduct. Debarment generally does not exceed three years.
Our reputation and ability to do business may be impacted by the improper conduct of
employees, vendors, agents or business partners.
We cannot ensure that our extensive compliance controls, policies and procedures will, in all
instances, protect us from reckless, unethical or criminal acts committed by our employees, vendors,
agents or business partners that would violate the laws of the jurisdictions in which the Company
operates, including laws governing payments to government officials, competition, data privacy and
rights of employees. Any improper actions could subject us to civil or criminal investigations, monetary
and non-monetary penalties and could adversely impact our ability to conduct business, results of
operations and reputation.
Changes in legislation or government regulations or policies can have a significant impact
on our results of operations.
The sales and margins of each of our segments are directly impacted by government regulations.
Safety and performance regulations (including mandates of the Federal Aviation Administration and
other similar international regulatory bodies requiring the installation of equipment on aircraft), product
certification requirements and government procurement practices can impact Aerospace sales,
research and development expenditures, operating costs and profitability. The demand for and cost of
providing Automation and Control Solutions products, services and solutions can be impacted by fire,
security, safety, health care, environmental and energy efficiency standards and regulations.
Performance Materials and Technologies results of operations can be affected by environmental
(e.g. government regulation of fluorocarbons), safety and energy efficiency standards and regulations,
while emissions, fuel economy and energy efficiency standards and regulations can impact the
demand for turbochargers in our Transportation Systems segment. Honeywell sells products that
address safety and environmental regulation and a substantial portion of our portfolio is dedicated to
energy efficient products and services. Legislation or regulations regarding areas such as labor and
employment, employee benefit plans, tax, health, safety and environmental matters, import, export and
trade, intellectual property, product certification, and product liability may impact the results of each of
our operating segments and our consolidated results.
Completed acquisitions may not perform as anticipated or be integrated as planned, and
divestitures may not occur as planned.
We regularly review our portfolio of businesses and pursue growth through acquisitions and seek
to divest non-core businesses. We may not be able to complete transactions on favorable terms, on a
timely basis or at all. In addition, our results of operations and cash flows may be adversely impacted
19
by (i) the failure of acquired businesses to meet or exceed expected returns, (ii) the discovery of
unanticipated issues or liabilities, (iii) the failure to integrate acquired businesses into Honeywell on
schedule and/or to achieve synergies in the planned amount or within the expected timeframe, (iv) the
inability to dispose of non-core assets and businesses on satisfactory terms and conditions and within
the expected timeframe, and (v) the degree of protection provided by indemnities from sellers of
acquired companies and the obligations under indemnities provided to purchasers of our divested
businesses.
We cannot predict with certainty the outcome of litigation matters, government proceedings
and other contingencies and uncertainties.
We are subject to a number of lawsuits, investigations and disputes (some of which involve
substantial amounts claimed) arising out of the conduct of our business, including matters relating to
commercial transactions, government contracts, product liability (including asbestos), prior acquisitions
and divestitures, employment, employee benefits plans, intellectual property, antitrust, import and
export matters and environmental, health and safety matters. Resolution of these matters can be
prolonged and costly, and the ultimate results or judgments are uncertain due to the inherent
uncertainty in litigation and other proceedings. Moreover, our potential liabilities are subject to change
over time due to new developments, changes in settlement strategy or the impact of evidentiary
requirements, and we may become subject to or be required to pay damage awards or settlements that
could have a material adverse effect on our results of operations, cash flows and financial condition.
While we maintain insurance for certain risks, the amount of our insurance coverage may not be
adequate to cover the total amount of all insured claims and liabilities. It also is not possible to obtain
insurance to protect against all our operational risks and liabilities. The incurrence of significant
liabilities for which there is no or insufficient insurance coverage could adversely affect our results of
operations, cash flows, liquidity and financial condition.
Our operations and the prior operations of predecessor companies expose us to the risk of
material environmental liabilities.
Mainly because of past operations and operations of predecessor companies, we are subject to
potentially material liabilities related to the remediation of environmental hazards and to claims of
personal injuries or property damages that may be caused by hazardous substance releases and
exposures. We have incurred remedial response and voluntary clean-up costs for site contamination
and are a party to lawsuits and claims associated with environmental and safety matters, including past
production of products containing hazardous substances. Additional lawsuits, claims and costs
involving environmental matters are likely to continue to arise in the future. We are subject to various
federal, state, local and foreign government requirements regulating the discharge of materials into the
environment or otherwise relating to the protection of the environment. These laws and regulations can
impose substantial fines and criminal sanctions for violations, and require installation of costly
equipment or operational changes to limit emissions and/or decrease the likelihood of accidental
hazardous substance releases. We incur, and expect to continue to incur, capital and operating costs
to comply with these laws and regulations. In addition, changes in laws, regulations and enforcement
of policies, the discovery of previously unknown contamination or new technology or information
related to individual sites, the establishment of stricter state or federal toxicity standards with respect to
certain contaminants, or the imposition of new clean-up requirements or remedial techniques could
require us to incur costs in the future that would have a negative effect on our financial condition or
results of operations.
Our expenses include significant costs related to employee and retiree health benefits.
With approximately 131,000 employees, including approximately 51,000 in the U.S., our expenses
relating to employee health and retiree health benefits are significant. In recent years, we have
experienced significant increases in certain of these costs, largely as a result of economic factors
beyond our control, in particular, ongoing increases in health care costs well in excess of the rate of
inflation. Continued increasing health-care costs, legislative or regulatory changes, and volatility in
20
discount rates, as well as changes in other assumptions used to calculate retiree health benefit
expenses, may adversely affect our financial position and results of operations.
Risks related to our defined benefit pension plans may adversely impact our results of
operations and cash flow.
Significant changes in actual investment return on pension assets, discount rates, and other
factors could adversely affect our results of operations and pension contributions in future periods. U.S.
generally accepted accounting principles require that we calculate income or expense for the plans
using actuarial valuations. These valuations reflect assumptions about financial markets and interest
rates, which may change based on economic conditions. Funding requirements for our U.S. pension
plans may become more significant. However, the ultimate amounts to be contributed are dependent
upon, among other things, interest rates, underlying asset returns and the impact of legislative or
regulatory changes related to pension funding obligations. For a discussion regarding the significant
assumptions used to estimate pension expense, including discount rate and the expected long-term
rate of return on plan assets, and how our financial statements can be affected by pension plan
accounting policies, see Critical Accounting Policies included in Item 7. Managements Discussion
and Analysis of Financial Condition and Results of Operations.
Additional tax expense or additional tax exposures could affect our future profitability.
We are subject to income taxes in both the United States and various non-U.S. jurisdictions. Our
domestic and international tax liabilities are dependent, in part, upon the distribution of income among
these different jurisdictions. In 2013, our tax expense represented 26.8 percent of our income before
tax. Our tax expense includes estimates of tax reserves and reflects other estimates and assumptions,
including assessments of future earnings of the Company which could impact the valuation of our
deferred tax assets. Our future results of operations could be adversely affected by changes in the
effective tax rate as a result of a change in the mix of earnings in countries with differing statutory tax
rates, changes in the overall profitability of the Company, changes in tax legislation and rates, changes
in generally accepted accounting principles, changes in the valuation of deferred tax assets and
liabilities, changes in the amount of earnings permanently reinvested offshore, the results of audits and
examinations of previously filed tax returns and continuing assessments of our tax exposures.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
We have approximately 1,300 locations consisting of plants, research laboratories, sales offices
and other facilities. Our headquarters and administrative complex is located in Morris Township, New
Jersey. Our plants are generally located to serve large marketing areas and to provide accessibility to
raw materials and labor pools. Our properties are generally maintained in good operating condition.
Utilization of these plants may vary with sales to customers and other business conditions; however,
no major operating facility is significantly idle. We own or lease warehouses, railroad cars, barges,
automobiles, trucks, airplanes and materials handling and data processing equipment. We also lease
space for administrative and sales staffs. Our properties and equipment are in good operating
condition and are adequate for our present needs. We do not anticipate difficulty in renewing existing
leases as they expire or in finding alternative facilities.
21
Our principal plants, which are owned in fee unless otherwise indicated, are as follows:
Aerospace
Anniston, AL (leased)
Glendale, AZ (leased)
Phoenix, AZ (partially leased)
Tempe, AZ
Tucson, AZ
Torrance, CA
Clearwater, FL
Olathe, KS
Minneapolis, MN (partially leased)
Plymouth, MN
Rocky Mount, NC
Albuquerque, NM (partially leased)
Urbana, OH
Greer, SC
Toronto, Canada
Olomouc, Czech
Republic (leased)
Penang, Malaysia
Chihuahua, Mexico
Singapore
Yeovil, UK (leased)
South Bend, IN
San Diego, CA (leased)
Northford, CT
Freeport, IL
St. Charles, IL (leased)
Golden Valley, MN
York, PA (leased)
Murfreesboro, TN (leased)
Pleasant Prairie, WI (leased)
Shenzhen, China (leased)
Suzhou, China
Tianjin, China (leased)
Brno, Czech Republic (leased)
Mosbach, Germany
Neuss, Germany
Schonaich, Germany
(leased)
Pune, India (partially
leased)
Chihuahua, Mexico
(partially leased)
Juarez, Mexico
(partially leased)
Tijuana, Mexico
(leased)
Emmen, Netherlands
Newhouse, Scotland
Mobile, AL (partially leased)
Des Plaines, IL
Metropolis, IL
Baton Rouge, LA
Geismar, LA
Shreveport, LA
Frankford, PA
Pottsville, PA
Orange, TX
Chesterfield, VA
Colonial Heights, VA
Hopewell, VA
Spokane, WA
(partially leased)
Seelze, Germany
Tulsa, OK
Danville, IL
Shanghai, China
Glinde, Germany
Atessa, Italy
Kodama, Japan
Ansan, Korea (leased)
Mexicali, Mexico
(partially leased)
Bucharest, Romania
Pune, India
Item 3. Legal Proceedings
We are subject to a number of lawsuits, investigations and claims (some of which involve
substantial amounts) arising out of the conduct of our business. See a discussion of environmental,
asbestos and other litigation matters in Note 22 Commitments and Contingencies of Notes to Financial
Statements.
Environmental Matters Involving Potential Monetary Sanctions in Excess of $100,000
The U.S. Environmental Protection Agency (EPA) has alleged that PreCon, Inc., a Honeywell
service provider, failed to comply with certain environmental regulations at a Virginia facility. EPA has
initially calculated the relevant penalty at approximately $180,000, although negotiations are ongoing.
Honeywell includes this allegation because of its contractual relationship with PreCon, Inc. The EPA
has made no allegations against Honeywell.
Although the outcome of the matter discussed above cannot be predicted with certainty, we do not
believe that it will have a material adverse effect on our consolidated financial position, consolidated
results of operations or operating cash flows.
22
Item 4. Mine Safety Disclosures
Not applicable.
Executive Officers of the Registrant
The executive officers of Honeywell, listed as follows, are elected annually by the Board of
Directors. There are no family relationships among them.
Name, Age,
Date First
Elected an
Executive Officer Business Experience
David M. Cote, 61
2002(a)
Chairman of the Board and Chief Executive Officer since July
2002.
Katherine L. Adams, 49
2009
Senior Vice President and General Counsel since April 2009.
Vice President and General Counsel from September 2008 to
April 2009. Vice President and General Counsel for
Performance Materials and Technologies from February 2005
to September 2008.
David J. Anderson, 64
2003
Senior Vice President and Chief Financial Officer since June
2003.
Roger Fradin, 60
2004
President and Chief Executive Officer Automation and Control
Solutions since January 2004.
Alexandre Ismail, 48
2009
President Energy, Safety and Security since May 2013. President
and Chief Executive Officer Transportation Systems from April
2009 to May 2013. President Turbo Technologies from
November 2008 to April 2009. President Global Passengers
Vehicles from August 2006 to November 2008.
Mark R. James, 52
2007
Senior Vice President Human Resources, Procurement and
Communications since November 2007.
Terrence S. Hahn, 47
2013
President and Chief Executive Officer Transportation Systems
since May 2013. Vice President and General Manager of
Fluorine Products from March 2007 to May 2013.
Andreas C. Kramvis, 61
2008
President and Chief Executive Officer Performance Materials and
Technologies since March 2008. President of Environmental
and Combustion Controls from September 2002 to February
2008.
Timothy O. Mahoney, 57
2009
President and Chief Executive Officer Aerospace since
September 2009. Vice President Aerospace Engineering and
Technology and Chief Technology Officer from March 2007 to
August 2009.
Krishna Mikkilineni, 54
2010
Senior Vice President Engineering, Operations and Information
Technology since April 2013. Senior Vice President
Engineering and Operations from April 2010 to April 2013
and President Honeywell Technology Solutions from January
2009 to April 2013. Vice President Honeywell Technology
Solutions from July 2002 to January 2009
(a) Also a Director.
23
Part II.
Item 5. Market for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
Honeywells common stock is listed on the New York Stock Exchange. Market and dividend
information for Honeywells common stock is included in Note 27 Unaudited Quarterly Financial
Information of Notes to Financial Statements in Item 8. Financial Statements and Supplementary
Data.
The number of record holders of our common stock at December 31, 2013 was 55,537.
Honeywell purchased 3,500,000 shares of its common stock, par value $1 per share, in the
quarter ending December 31, 2013. In December 2013, the Board of Directors authorized the
repurchase of up to a total of $5 billion of Honeywell common stock, which replaced the previously
approved share repurchase program. $5 billion remained available as of December 31, 2013 for
additional share repurchases. Honeywell presently expects to repurchase outstanding shares from time
to time to offset the dilutive impact of employee stock based compensation plans, including future
option exercises, restricted unit vesting and matching contributions under our savings plans. The
amount and timing of future repurchases may vary depending on market conditions and the level of
operating, financing and other investing activities.
The following table summarizes Honeywells purchase of its common stock, par value $1 per
share, for the three months ended December 31, 2013:
Issuer Purchases of Equity Securities
Period
Total
Number of
Shares
Purchased
Average
Price Paid
per Share
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans
or Programs
Approximate Dollar
Value of Shares that
May Yet be Purchased
Under Plans or
Programs
(Dollars in millions)
(a) (b) (c) (d)
November 2013 3,500,000 $86.96 3,500,000 $ 525
December 2013 $5,000
24
Performance Graph
The following graph compares the five-year cumulative total return on our Common Stock to the
total returns on the Standard & Poors 500 Stock Index and a composite of Standard & Poors
Industrial Conglomerates and Aerospace and Defense indices, on a 60%/40% weighted basis,
respectively (the Composite Index). The weighting of the components of the Composite Index are
based on our segments relative contribution to total segment profit. The selection of the Industrial
Conglomerates component of the Composite Index reflects the diverse and distinct range of non-
aerospace businesses conducted by Honeywell. The annual changes for the five-year period shown in
the graph are based on the assumption that $100 had been invested in Honeywell stock and each
index on December 31, 2008 and that all dividends were reinvested.
COMPARISON OF CUMULATIVE FIVE YEAR TOTAL RETURN
D
O
L
L
A
R
S
0
50
100
150
200
250
300
350
2012 2013 2011 2010 2009 2008
Dec 2008 Dec 2009 Dec 2010 Dec 2011 Dec 2012 Dec 2013
Honeywell 100 123.82 172.74 181.09 217.03 319.15
S&P 500 Index
100 126.46 145.51 148.59 172.37 228.19

Composite Index 100 115.95 135.97 139.41 164.06 240.51
25
HONEYWELL INTERNATIONAL INC.
The Consumer Products Group (CPG) automotive aftermarket business had historically been part
of the Transportation Systems reportable segment. In accordance with generally accepted accounting
principles, CPG is presented as discontinued operations in all periods presented. See Note 2
Acquisitions and Divestitures for further details. This selected financial data should be read in
conjunction with Honeywells Consolidated Financial Statements and related Notes included elsewhere
in this Annual Report as well as the section of this Annual Report titled Item 7. Managements
Discussion and Analysis of Financial Condition and Results of Operations.
Item 6. Selected Financial Data
2013 2012 2011 2010 2009
Years Ended December 31,
(Dollars in millions, except per share amounts)
Results of Operations
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $39,055 $37,665 $36,529 $32,350 $29,951
Amounts attributable to Honeywell:
Income from continuing operations less net
income attributable to the noncontrolling
interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,924 2,926 1,858 1,944 1,492
Income from discontinued operations(1). . . . 209 78 56
Net income attributable to Honeywell . . . . . . 3,924 2,926 2,067 2,022 1,548
Earnings Per Common Share
Basic:
Income from continuing operations . . . . . . . . 4.99 3.74 2.38 2.51 1.99
Income from discontinued operations . . . . . . 0.27 0.10 0.07
Net income attributable to Honeywell . . . . . . 4.99 3.74 2.65 2.61 2.06
Assuming dilution:
Income from continuing operations . . . . . . . . 4.92 3.69 2.35 2.49 1.98
Income from discontinued operations . . . . . . 0.26 0.10 0.07
Net income attributable to Honeywell . . . . . . 4.92 3.69 2.61 2.59 2.05
Dividends per share. . . . . . . . . . . . . . . . . . . . . . . . . . . 1.68 1.53 1.37 1.21 1.21
Financial Position at Year-End
Property, plant and equipmentnet . . . . . . . . . . . . 5,278 5,001 4,804 4,724 4,847
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,435 41,853 39,808 37,834 35,993
Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,028 1,101 674 889 1,361
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,801 6,395 6,881 5,755 6,246
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,829 7,496 7,555 6,644 7,607
Redeemable noncontrolling interest . . . . . . . . . . . . 167 150
Shareowners equity . . . . . . . . . . . . . . . . . . . . . . . . . . 17,579 13,065 10,902 10,787 8,971
(1) For the year ended December 31, 2011, income from discontinued operations includes a $178
million, net of tax gain, resulting from the sale of the CPG business which funded a portion of the
2011 repositioning actions.
26
Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations
The following Managements Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) is intended to help the reader understand the results of operations and financial
condition of Honeywell International Inc. and its consolidated subsidiaries (Honeywell or the
Company) for the three years ended December 31, 2013. All references to Notes related to Notes to
the Financial Statements in Item 8-Financial Statements and Supplementary Data.
principles, CPG results are excluded from continuing operations and are presented as discontinued
operations in all periods presented. See Note 2 Acquisitions and Divestitures for further details.
EXECUTIVE SUMMARY
For Honeywell, 2013 marked another year of growth and enhanced profitability. Despite a modest
2.5 percent growth in World GDP and Industrial Production, Honeywells 2013 revenues were $39.1
billion representing a 4 percent improvement compared to 2012 revenues of $37.7 billion. Our segment
profit improved by 8 percent, roughly two times revenue growth, evidencing the Companys continued
focus on operational excellence. We achieved strong segment profit expansion while reinvesting in our
businesses through seed planting and continued focus on proactive repositioning. See Review of
Business Segments section of this MD&A for a reconciliation of segment profit to consolidated income
from continuing operations before taxes.
The Companys operational excellence and ability to expand profit faster than sales growth is due
in part to a consistent, methodical application of several key internal business processes which drive
improvements in organizational efficiency and service quality, bringing world-class products and
services to markets faster and more cost effectively for our customers. Honeywell refers to these
processes as the Honeywell Enablers. In 2013, Honeywell continued to strengthen and expand the use
of the Honeywell Enablers:
The Honeywell Operating System (HOS): HOS drives sustainable improvements in our
manufacturing operations to generate exceptional performance in safety, quality, delivery, cost,
and inventory management. Approximately 75 percent of our manufacturing cost base has
achieved HOS certification.
Velocity Product Development (VPD): VPD is a process which brings together all of the
functions necessary to successfully launch new productsR&D, manufacturing, marketing and
salesto increase the probability that in commercializing new technologies Honeywell delivers
the right products at the right price.
Functional Transformation (FT): Functional Transformation is HOS for our administrative
functionsFinance, Legal, HR, IT and Purchasingstandardizing the way we work, which
improves service quality and reduces costs.
The Company continues to invest for future growth as measured by a number of important
metrics:
R&D spending at 4.6 percent of revenues was targeted at such high growth areas as natural
gas processing, low global warming refrigerants and blowing agents, and voice control and
wireless control devices and technologies.
Capital expenditures grew 7 percent to $947 million principally related to the construction and
expansion of Performance Materials and Technologies manufacturing facilities, as well as
upgrades to our Aerospace facilities.
The Company recognized approximately $231 million of charges relating to restructuring actions
to support sustainable productivity in years to come.
27
The Company completed $1,133 million (net of cash acquired) in acquisitions in 2013, including
the acquisition of Intermec, Inc. (Intermec), a leading provider of mobile computing, radio
frequency identification solutions (RFID) and bar code, label and receipt printers for use in
warehousing, supply chain, field service and manufacturing environments and RAE Systems,
Inc. (RAE), a global manufacturer of fixed and portable gas and radiation detection systems, and
software.
The Company continued to monitor its portfolio of businesses and to divest those that do not fit
within our long-term strategic plan. In January 2014, the Company entered into a definitive
agreement to sell its Friction Materials business for approximately $155 million.
Expansion of Honeywells presence and sales in high growth regions and countries such as
China, India, Eastern Europe, the Middle-East, and Latin America. Sales to customers outside
the United States now account for approximately 55 percent of total revenues.
Operating cash flow grew by 23 percent in 2013 to $4,335 million. This operating cash flow
performance enabled us to invest $947 million in capital expenditures, partially fund the acquisitions
discussed above, make $156 million in non-U.S. pension contributions, provide a 10 percent increase
in the Companys cash dividend rate (vs. 2012) and repurchase 13.5 million shares of common stock.
CONSOLIDATED RESULTS OF OPERATIONS
Net Sales
2013 2012 2011
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $39,055 $37,665 $36,529
% change compared with prior period. . . . . . . . . . . . . . . . . . 4% 3%
The change in net sales compared to the prior year period is attributable to the following:
2013
Versus
2012
2012
Versus
2011
Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1% 2%
Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1% 1%
Acquisitions/Divestitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2% 2%
Foreign Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2)%
4% 3%
A discussion of net sales by segment can be found in the Review of Business Segments section
of this MD&A.
Cost of Products and Services Sold
2013 2012 2011
Cost of products and services sold . . . . . . . . . . . . . . . . . . . . $28,364 $28,291 $28,556
% change compared with prior period. . . . . . . . . . . . . . . . . . (1)%
Gross Margin percentage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.4% 24.9% 21.8%
Cost of products and services sold increased by $73 million in 2013 compared with 2012
principally due to an estimated increase in direct material costs of approximately $585 million and
indirect material costs of approximately $115 million (driven by higher sales volume and acquisitions)
and increased repositioning and other charges of approximately $140 million partially offset by a
decrease in pension expense of approximately $760 million, primarily driven by the $650 million
decrease in the pension mark-to-market adjustment allocated to cost of products and services sold
(approximately $30 million in 2013 versus approximately $680 million in 2012).
Gross margin percentage increased by 2.5 percentage points in 2013 compared with 2012
principally due to lower pension expense (approximately 2.0 percentage point impact primarily driven
by the decrease in the pension mark-to-market adjustment allocated to cost of products and services
28
sold), higher segment gross margin in all of our business segments (approximately 0.5 percentage
point impact collectively) and lower other postretirement expense (0.1 percentage point impact)
partially offset by higher repositioning and other charges (approximately 0.4 percentage point impact)
Cost of products and services sold decreased by $265 million or 1 percent in 2012 compared with
2011, principally due to a decrease in pension expense of approximately $800 million (primarily driven
sold of $780 million) and a decrease in repositioning and other charges of approximately $220 million,
partially offset by an estimated increase in direct material costs of approximately $620 million driven
substantially by a 3 percent increase in sales as a result of the factors (excluding price) shown above
and discussed in the Review of Business Segments section of this MD&A and an increase in other
postretirement expense of approximately $135 million due to the absence of 2011 curtailment gains.
Gross margin percentage increased by 3.1 percentage points in 2012 compared with 2011
principally due to lower pension expense (approximately 2.2 percentage point impact primarily driven
sold), lower repositioning actions (approximately 0.6 percentage point impact) and higher segment
gross margin in our Aerospace, Automation and Control Solutions and Performance Materials and
Technologies segments (approximately 0.4 percentage point impact collectively), partially offset by
higher other postretirement expense (approximately 0.4 percentage point impact).
Selling, General and Administrative Expenses
2013 2012 2011
Selling, general and administrative expense. . . . . . . . . . . . . . . . $5,190 $5,218 $5,399
Percent of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.3% 13.9% 14.8%
Selling, general and administrative expenses (SG&A) decreased as a percentage of sales by 0.6
percent in 2013 compared to 2012 primarily driven by (i) higher sales as a result of the factors
discussed in the Review of Business Segments section of this MD&A, (ii) an estimated $270 million
decrease in pension expense primarily driven by an approximately $250 million decrease in the
pension mark-to-market charge allocated to SG&A (approximately $20 million in 2013 versus
approximately $270 million in 2012) partially offset by an estimated $215 million increase in labor costs
(primarily acquisitions, merit increases and investment for growth) and an $80 million increase in
repositioning charges.
Selling, general and administrative expenses decreased as a percentage of sales by 0.9 percent in
2012 compared to 2011 driven by the impact of higher sales as a result of the factors discussed in the
Review of Business Segments section of this MD&A, an estimated $110 million decrease in pension
expense (driven by the decrease in the portion of the pension mark-to-market charge allocated to
SG&A), $90 million decrease due to foreign exchange and $80 million decrease in repositioning
actions, partially offset by the impact of an estimated $140 million increase in costs resulting from
acquisitions, investment for growth and merit increases (net of other employee related costs).
Other (Income) Expense
2013 2012 2011
Equity (income) loss of affiliated companies . . . . . . . . . . . . . . . . . . . . . $ (36) $(45) $(51)
Gain on sale of available for sale investments. . . . . . . . . . . . . . . . . . . (195)
Loss (gain) on sale of non-strategic businesses and assets . . . . . . 20 (5) (61)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (69) (58) (58)
Foreign exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 36 50
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2 36
$(238) $(70) $(84)
Other income increased by $168 million in 2013 compared to 2012 primarily due to $195 million of
realized gain related to the sale of marketable equity securities. These securities (B/E Aerospace
common stock), designated as available for sale, were obtained in conjunction with the sale of the
29
Consumables Solutions business in July 2008. This gain was partially offset by an increase in loss on
sale of non-strategic businesses and assets of $25 million, primarily due to a pre-tax loss of
approximately $28 million related to the pending divestiture of the Friction Materials business within our
Transportation Systems segment. See Note 2, Acquisitions and Divestitures for further details.
Other income decreased by $14 million in 2012 compared to 2011 due primarily to a $50 million
pre-tax gain related to the divestiture of the automotive on-board sensors products business within our
Automation and Control Solutions segment in the first quarter of 2011, partially offset by a loss of $29
million resulting from early redemption of debt in 2011 included within Other, net and the reduction of
approximately $6 million of acquisition related costs compared to 2011 included within Other, net.
Interest and Other Financial Charges
2013 2012 2011
Interest and other financial charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $327 $351 $376
% change compared with prior period. . . . . . . . . . . . . . . . . . . . . . . . . . . (7)% (7)%
Interest and other financial charges decreased by 7 percent in 2013 compared with 2012 primarily
due to lower borrowing costs, partially offset by higher average debt balances.
Interest and other financial charges decreased by 7 percent in 2012 compared with 2011 primarily
due to lower borrowing costs, partially offset by higher average debt balances.
Tax Expense
2013 2012 2011
Tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,450 $ 944 $ 417
Effective tax rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.8% 24.4% 18.3%
The effective tax rate increased by 2.4 percentage points in 2013 compared with 2012. The year
over year increase in the effective tax rate was primarily attributable to lower mark-to-market pension
expense in the U.S. Other factors causing an increase in the effective tax rate include higher tax
expense related to an increase in tax reserves and higher state tax expense. These increases in the
effective tax rate were partially offset by tax benefits from retroactive law changes in the U.S. The
Companys foreign effective tax rate for 2013 was 19.0 percent, an increase of approximately 2.0
percentage points compared to 2012. The year over year increase in the foreign effective tax rate was
primarily attributable to higher expense related to retroactive tax law changes in Germany and
additional reserves in various jurisdictions, coupled with higher earnings in higher tax rate jurisdictions.
The effective tax rate was lower than the U.S. statutory rate of 35 percent primarily due to overall
foreign earnings taxed at lower rates.
The effective tax rate increased by 6.1 percentage points in 2012 compared with 2011 primarily
due to a change in the mix of earnings taxed at higher rates (primarily driven by an approximate 6.1
percentage point impact from the decrease in pension mark-to-market expense), a decreased benefit
from valuation allowances, a decreased benefit from the settlement of tax audits and the absence of
the U.S. R&D tax credit, partially offset by a decreased expense related to tax reserves. The foreign
effective tax rate was 17.0 percent, a decrease of approximately 4.1 percentage points which primarily
consisted of a 10.0 percent impact related to a decrease in tax reserves, partially offset by a 5.2
percent impact from increased valuation allowances on net operating losses primarily due to a
decrease in Luxembourg and France earnings available to be offset by net operating loss carry
forwards and a 1.4 percent impact from tax expense related to foreign exchange. The effective tax rate
was lower than the U.S. statutory rate of 35 percent primarily due to overall foreign earnings taxed at
lower rates.
The American Taxpayer Relief Act of 2012 was signed into law on January 2, 2013. Some of
these provisions provided retroactive changes to the 2012 tax year which were not taken into account
in determining the Companys effective tax rate for 2012. The impact of these retroactive changes was
approximately $76 million of lower tax expense and was recorded in the first quarter of 2013.
30
2013 2012 2011
Amounts attributable to Honeywell
Income from continuing operations . . . . . . . . . . . . . . . . . . . . $3,924 $2,926 $1,858
Income from discontinued operations. . . . . . . . . . . . . . . . . . 209
Net income attributable to Honeywell . . . . . . . . . . . . . . . . . . $3,924 $2,926 $2,067
Earnings per share of common stockassuming dilution
Income from continuing operations . . . . . . . . . . . . . . . . . . . . $ 4.92 $ 3.69 $ 2.35
Income from discontinued operations. . . . . . . . . . . . . . . . . . 0.26
Net income attributable to Honeywell . . . . . . . . . . . . . . . . . . $ 4.92 $ 3.69 $ 2.61
Earnings per share of common stockassuming dilution increased by $1.23 per share in 2013
compared with 2012 primarily due to lower pension expense (mainly due to a decrease in the pension
mark-to-market adjustment), increased segment profit in each of our business segments and higher
other income as discussed above, partially offset by increased tax expense and higher repositioning
and other charges.
Earnings per share of common stockassuming dilution increased by $1.08 per share in 2012
compared with 2011 primarily due to lower pension expense (mainly due to a decrease in the pension
mark-to-market adjustment), increased segment profit in our Aerospace, Automation and Control
Solutions and Performance Materials and Technologies segments, lower repositioning and other
charges, partially offset by increased tax expense, decreased income from discontinued operations
and higher other postretirement expense.
For further discussion of segment results, see Review of Business Segments.
BUSINESS OVERVIEW
This Business Overview provides a summary of Honeywell and its four reportable operating
segments (Aerospace, Automation and Control Solutions, Performance Materials and Technologies
and Transportation Systems), including their respective areas of focus for 2014 and the relevant
economic and other factors impacting their results, and a discussion of each segments results for the
three years ended December 31, 2013. Each of these segments is comprised of various product and
service classes that serve multiple end markets. See Note 24 Segment Financial Data of Notes to the
Financial Statements for further information on our reportable segments and our definition of segment
profit.
Economic and Other Factors
In addition to the factors listed below with respect to each of our operating segments, our
consolidated operating results are principally impacted by:
Change in global economic growth rates and industry conditions and demand in our key end
markets;
Overall sales mix, in particular the mix of Aerospace original equipment and aftermarket sales
and the mix of Automation and Control Solutions (ACS) products, distribution and services
sales;
The extent to which cost savings from productivity actions are able to offset or exceed the
impact of material and non-material inflation;
The impact of the pension discount rate and asset returns on pension expense, including
mark-to-market adjustments, and funding requirements; and
The impact of fluctuations in foreign currency exchange rates (in particular the Euro), relative to
the U.S. dollar.
31
Areas of Focus for 2014
The 2014 areas of focus are supported by the enablers including the Honeywell Operating
System, our Velocity Product Development process, and Functional Transformation. These areas of
focus are generally applicable to each of our operating segments and include:
Driving profitable growth through R&D, technological excellence and optimized manufacturing
capability to deliver innovative products that customers value;
Expanding margins by maintaining and improving the Companys cost structure through
manufacturing and administrative process improvements, repositioning, and other actions, which
will drive productivity and enhance the flexibility of the business as it works to proactively
respond to changes in end market demand;
Proactively managing raw material costs through formula and long-term supply agreements and
hedging activities, where feasible and prudent;
Driving strong cash flow conversion through effective working capital management which will
enable the Company to undertake strategic actions to benefit the business including capital
expenditures, strategic acquisitions, and returning cash to shareholders;
Increasing our sales penetration and expanding our localized footprint in high growth regions,
including China, India, Eastern Europe, the Middle East and Latin America;
Aligning and prioritizing investments for long-term growth, while considering short-term demand
volatility;
Monitoring both suppliers and customers for signs of liquidity constraints, limiting exposure to
any resulting inability to meet delivery commitments or pay amounts due, and identifying
alternate sources of supply as necessary; and
Controlling Corporate and other non-operating costs, including costs incurred for asbestos and
environmental matters, pension and other post-retirement expenses and tax expense.
32
Review of Business Segments
2013 2012 2011
Net Sales
Aerospace
Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,043 $ 6,999 $ 6,494
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,937 5,041 4,981
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,980 12,040 11,475
Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,193 13,610 13,328
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,363 2,270 2,207
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,556 15,880 15,535
Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,223 5,642 5,064
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541 542 595
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,764 6,184 5,659
Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,755 3,561 3,859
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,755 3,561 3,859
Corporate
Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
$39,055 $37,665 $36,529
Segment Profit
Aerospace. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,372 $ 2,279 $ 2,023
Automation and Control Solutions . . . . . . . . . . . . . . . . . . . . . . . 2,437 2,232 2,083
Performance Materials and Technologies . . . . . . . . . . . . . . . . 1,271 1,154 1,042
Transportation Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 498 432 485
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (227) (218) (276)
$ 6,351 $ 5,879 $ 5,357
A reconciliation of segment profit to consolidated income from continuing operations before taxes
is as follows:
2013 2012 2011
Segment Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,351 $5,879 $ 5,357
Other income (expense)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 25 33
Interest and other financial charges. . . . . . . . . . . . . . . . . . . . . . . . . . . (327) (351) (376)
Stock compensation expense(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (170) (170) (168)
Pension ongoing income (expense)(2) . . . . . . . . . . . . . . . . . . . . . . . . 90 (36) (105)
Pension mark-to-market expense(2) . . . . . . . . . . . . . . . . . . . . . . . . . . (51) (957) (1,802)
Other postretirement income (expense)(2) . . . . . . . . . . . . . . . . . . . . (20) (72) 86
Repositioning and other charges(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . (663) (443) (743)
Income from continuing operations before taxes. . . . . . . . . . . . . . . $5,412 $3,875 $ 2,282
(1) Equity income (loss) of affiliated companies is included in Segment Profit.
(2) Amounts included in cost of products and services sold and selling, general and administrative
expenses.
33
2013 2012 2011
2013
Versus
2012
2012
Versus
2011
% Change
Aerospace Sales
Commercial:
Original Equipment
Air transport and regional . . . . . . . . $ 1,716 $ 1,601 $ 1,439 7% 11%
Business and general aviation . . . . 935 967 723 (3)% 34%
Aftermarket
Air transport and regional . . . . . . . . 2,960 2,947 2,828 4%
Business and general aviation . . . . 1,499 1,417 1,207 6% 17%
Defense and Space . . . . . . . . . . . . . . . . . . 4,870 5,108 5,278 (5)% (3)%
Total Aerospace Sales . . . . . . . . . . . 11,980 12,040 11,475
Sales
Energy Safety & Security . . . . . . . . . . . . . 8,756 8,123 7,977 8% 2%
Process Solutions . . . . . . . . . . . . . . . . . . . . 3,091 3,093 3,010 3%
Building Solutions & Distribution . . . . . . 4,709 4,664 4,548 1% 3%
Total Automation and Control
Solutions Sales . . . . . . . . . . . . . . . . 16,556 15,880 15,535
Performance Materials and
Technologies Sales
UOP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,962 2,253 1,931 31% 17%
Advanced Materials . . . . . . . . . . . . . . . . . . 3,802 3,931 3,728 (3)% 5%
Total Performance Materials and
Technologies Sales . . . . . . . . . . . . 6,764 6,184 5,659
Transportation Systems Sales
Turbo Technologies . . . . . . . . . . . . . . . . . . 3,755 3,561 3,859 5% (8)%
Total Transportation Systems
Sales . . . . . . . . . . . . . . . . . . . . . . . . . 3,755 3,561 3,859
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $39,055 $37,665 $36,529
Aerospace
Overview
Aerospace is a leading global supplier of aircraft engines, avionics, and related products and
services for aircraft manufacturers, airlines, aircraft operators, military services, and defense and space
contractors. Our Aerospace products and services include auxiliary power units, propulsion engines,
environmental control systems, electric power systems, engine controls, flight safety, communications,
navigation, radar and surveillance systems, aircraft lighting, management and technical services,
logistics services, advanced systems and instruments, aircraft wheels and brakes and repair and
overhaul services. Aerospace sells its products to original equipment (OE) manufacturers in the air
transport, regional, business and general aviation aircraft segments, and provides spare parts and
repair and maintenance services for the aftermarket (principally to aircraft operators). The United
States Government is a major customer for our defense and space products.
Aerospace operating results are principally impacted by:
New aircraft production rates and delivery schedules set by commercial air transport, regional
jet, business and general aviation OE manufacturers, as well as airline profitability, platform mix
and retirement of aircraft from service;
34
Global demand for commercial air travel as reflected in global flying hours and utilization rates
for corporate and general aviation aircraft, as well as the demand for spare parts and
maintenance and repair services for aircraft currently in use;
Level and mix of U.S. and foreign government appropriations for defense and space programs
and military activity;
Changes in customer platform development schedules, requirements and demands for new
technologies;
Availability and price variability of raw materials such as nickel, titanium and other metals; and
International regulation affecting aircraft operating equipage.
Aerospace
2013 2012 Change 2011 Change
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,980 $12,040 $11,475 5%
Cost of products and services sold . . . . . . . . . . . . . . 8,848 8,949 8,655
Selling, general and administrative expenses . . . . 547 606 589
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213 206 208
Segment profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,372 $ 2,279 4% $ 2,023 13%
Factors Contributing to Year-Over-Year Change Sales
Segment
Profit Sales
Segment
Profit
2013 vs. 2012 2012 vs. 2011
Organic growth/ Operational segment profit . . . . . . . . . . . . . 4% 3% 8%
Acquisitions and divestitures, net . . . . . . . . . . . . . . . . . . . . . . . 1% 1%
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1% 4%
Total % Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4% 5% 13%
Aerospace sales by major customer end-markets were as follows:
Customer End-Markets 2013 2012 2011
2013
Versus
2012
2012
Versus
2011
% of Aerospace
Sales
% Increase
(Decrease)
in Sales
Commercial original equipment
Air transport and regional . . . . . . . . . . . . . . . . . . . . . . . . . . 14% 13% 13% 7% 11%
Business and general aviation . . . . . . . . . . . . . . . . . . . . . . 8% 8% 6% (3)% 34%
Commercial original equipment . . . . . . . . . . . . . . . . . . . 22% 21% 19% 3% 19%
Commercial aftermarket
Air transport and regional . . . . . . . . . . . . . . . . . . . . . . . . . . 25% 25% 25% 4%
Business and general aviation . . . . . . . . . . . . . . . . . . . . . . 12% 12% 11% 6% 17%
Commercial aftermarket . . . . . . . . . . . . . . . . . . . . . . . . . . 37% 37% 36% 2% 8%
Defense and Space . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41% 42% 45% (5)% (3)%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 100% 100% 5%
2013 compared with 2012
Aerospace sales were flat in 2013 compared with 2012 primarily due to favorable pricing,
increased volumes in our commercial original equipment (OE) business and increased licensing
revenue (primarily due to a royalty gain in the fourth quarter), offset by decreased volumes in our
defense and space and commercial aftermarket businesses and an increase in payments due to
business and general aviation and air transport and regional OE manufacturers to partially offset their
pre-production costs associated with new aircraft platforms (OEM Payments).
Details regarding the changes in sales by customer end-markets are as follows:
35
Commercial original equipment (OE) sales increased by 3 percent in 2013 compared to 2012.
Air transport and regional OE sales increased by 7 percent in 2013 driven by higher air transport
volumes, consistent with the OE Manufacturers (OEM) higher production rates, partially offset
by lower regional jet sales.
Business and general aviation OE sales decreased by 3 percent in 2013 driven by an increase
in OEM Payments to business and general aviation customers, partially offset by strong demand
in the business jet mid to large cabin segment.
Commercial aftermarket sales increased by 2 percent in 2013 compared to 2012.
Air transport and regional aftermarket sales were flat for 2013 primarily due to higher repair and
overhaul activities related to utilization, offset by lower spares volumes.
Business and general aviation aftermarket sales increased by 6 percent in 2013 primarily due to
higher sales for retrofit, modifications and upgrades, partially offset by fewer repair and overhaul
activities.
Defense and space sales decreased by 5 percent in 2013 primarily due to U.S. government
program ramp downs and lower defense budget, partially offset by a royalty gain in the fourth
quarter.
Aerospace segment profit increased by 4 percent in 2013 compared with 2012 primarily due to an
increase in operational segment profit driven by commercial sales growth, as discussed above,
including favorable pricing and productivity, net of inflation, partially offset by lower defense and space
sales, as discussed above. The segment margin impact from other factors was flat, which reflects the
net effect of a royalty gain in the fourth quarter, offset by the unfavorable impact from an increase in
OEM Payments. Cost of products and services sold totaled $8.8 billion in 2013, a decrease of
approximately $101 million from 2012 which is primarily a result of the factors discussed above
(excluding price).
Aerospace sales increased by 5 percent in 2012 compared with 2011 primarily due to an increase
in organic growth of 3 percent primarily due to increased commercial sales volume, a 1 percent
increase from acquisitions, net of divestitures, and a 1 percent increase in revenue related to an $88
million reduction in payments to business and general aviation OE manufacturers to partially offset
their pre-production costs associated with new aircraft platforms (OEM Payments).
Details regarding the changes in sales by customer end-markets are as follows:
Commercial original equipment (OE) sales increased by 19 percent (12 percent organic) in 2012
compared to 2011.
Air transport and regional OE sales increased by 11 percent (11 percent organic) in 2012
primarily driven by higher sales to our OE customers, consistent with higher production rates,
and a favorable platform mix.
Business and general aviation OE sales increased by 34 percent (15 percent organic) in 2012
driven by strong demand in the business jet end-market, favorable platform mix, growth from
acquisitions and the favorable 12 percent impact of the OEM Payments discussed above.
Commercial aftermarket sales increased by 8 percent in 2012 compared to 2011.
Air transport and regional aftermarket sales increased by 4 percent for 2012 primarily due to
increased sales of spare parts and higher maintenance activity driven by an approximate 2
percent increase in global flying hours in 2012, increased sales of avionics upgrades, and
changes in customer buying patterns relating to maintenance activity in the first half of 2012.
Business and general aviation aftermarket sales increased by 17 percent in 2012 primarily due
to increased sales of spare parts and revenue associated with maintenance service agreements
and a higher penetration in retrofit, modifications, and upgrades.
36
Defense and space sales decreased by 3 percent (negative 4 percent organic) in 2012 primarily
due to anticipated program ramp downs, partially offset by higher international aftermarket sales
and growth from acquisitions, net of divestitures.
Aerospace segment profit increased by 13 percent in 2012 compared with 2011 primarily due to
an increase in operational segment profit of 8 percent, a 4 percent favorable impact from lower OEM
Payments, discussed above, and a 1 percent increase from acquisitions, net of divestitures. The
increase in operational segment profit is due to the favorable impact from higher price and productivity,
net of inflation, and commercial demand partially offset by increased research, development and
engineering investments. Cost of products and services sold totaled $9.0 billion in 2012, an increase of
approximately $324 million from 2011 which is primarily a result of the factors discussed above
(excluding price).
2014 Areas of Focus
Aerospaces primary areas of focus for 2014 include:
Global pursuit of new commercial, defense and space programs;
Driving customer satisfaction through operational excellence (product quality, cycle time
reduction, and supplier management);
Aligning research and development and customer support costs with customer requirements
and demand for new platforms with high marketplace appeal;
Expanding sales and operations in international locations;
Focusing on cost structure initiatives to maintain profitability in face of economic uncertainty and
potential defense and space budget reductions and program specific appropriations;
Continuing to design equipment that enhances the safety, performance and durability of
aerospace and defense equipment, while reducing weight and operating costs; and
Continued deployment and optimization of our common enterprise resource planning (ERP)
system.
Automation and Control Solutions (ACS)
Overview
ACS provides innovative products and solutions that make homes, buildings, industrial sites and
infrastructure more efficient, safe and comfortable. Our ACS products and services include controls
and displays for heating, cooling, indoor air quality, ventilation, humidification, combustion, lighting and
home automation; advanced software applications for home/building control and optimization; sensors,
switches, control systems and instruments for measuring pressure, air flow, temperature and electrical
current; security, fire and gas detection; personal protection equipment; access control; video
surveillance; remote patient monitoring systems; products for automatic identification and data
collection; installation, maintenance and upgrades of systems that keep buildings safe, comfortable
and productive; and automation and control solutions for industrial plants, including field instruments
and advanced software and automation systems that integrate, control and monitor complex processes
in many types of industrial settings as well as equipment that controls, measures and analyzes natural
gas production and transportation.
ACSs operating results are principally impacted by:
Economic conditions and growth rates in developed (North America, Europe and Australia) and
high growth regions;
Industrial production and global commercial construction (including retrofits and upgrades);
Demand for residential security, environmental control retrofits and upgrades and energy
efficient products and solutions;
37
Government and public sector spending;
The strength of global capital and operating spending on process (including petrochemical and
refining) and building automation;
Inventory levels in distribution channels; and
Changes to energy, fire, security, health care, safety and environmental concerns and
regulations.
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,556 $15,880 4% $15,535 2%
Cost of products and services sold . . . . . . . . . . . . . . . 10,913 10,613 10,401
Selling, general and administrative expenses. . . . . . 2,898 2,743 2,773
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308 292 278
Segment profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,437 $ 2,232 9% $ 2,083 7%
Segment
Profit Sales
Segment
Profit
2013 vs. 2012 2012 vs. 2011
Organic growth/ Operational segment profit . . . . . . . . . . . . . 2% 8% 3% 8%
Foreign exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0% 0% (2)% (2)%
Acquisitions and divestitures, net . . . . . . . . . . . . . . . . . . . . . . . 2% 1% 1% 1%
Total % Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4% 9% 2% 7%
Automation and Control Solutions (ACS) sales increased by 4 percent in 2013 compared with
2012, primarily due to organic sales growth and growth from acquisitions.
Sales in our Energy, Safety & Security businesses increased by 8 percent (3 percent organic) in
2013 principally due to (i) the positive impact of acquisitions, (ii) increases in sales volumes in
our environmental and combustion control and security businesses driven by improved U.S.
residential market conditions and new product introductions and (iii) higher sales volumes of our
fire systems and sensors and safety products (in the second half), partially offset by decreases
in sales volumes of our sensing and control products (in the first half of 2013) and scanning and
mobility products primarily the result of continued softness in their U.S. end markets.
Sales in our Process Solutions business were flat (increased 1 percent organic) in 2013
principally due to decreased volume reflecting the completion of several large projects as
expected offset by service and software solutions volume growth.
Sales in Building Solutions & Distribution increased by 1 percent in 2013 principally due to
increased sales volumes in our Americas Distribution business due to improved U.S. residential
market conditions partially offset by continued softness in the U.S. energy retrofit business.
ACS segment profit increased by 9 percent in 2013 compared with 2012 due to an 8 percent
increase in operational segment profit and a 1 percent increase from acquisitions. The increase in
operational segment profit is primarily the result of the positive impact from price and productivity, net
of inflation, investment for growth and higher sales volumes as discussed above. Cost of products and
services sold totaled $10.9 billion in 2013, an increase of $300 million which is primarily due to
acquisitions, inflation and higher sales volume partially offset by the favorable impact of productivity
and foreign exchange.
38
ACS sales increased by 2 percent in 2012 compared with 2011, primarily due to a 3 percent
increase in organic revenue driven by increased sales volume and 1 percent growth from acquisitions,
net of divestitures, partially offset by the unfavorable impact of foreign exchange.
Sales in our Energy, Safety & Security businesses increased by 2 percent (1 percent organic) in
2012 principally due to (i) the positive impact of acquisitions (most significantly EMS
Technologies, Inc. and Kings Safetywear Limited), net of divestitures, (ii) higher sales volumes
due to contract wins and new product introductions in the scanning and mobility business, (iii)
higher sales volumes due to improved U.S. residential market conditions and new product
introductions in the security business, partially offset by (i) the unfavorable impact of foreign
exchange, (ii) lower sales volume in Europe and (iii) decreases in sales volumes of our personal
protective equipment and sensing and control products primarily the result of softness in
industrial end markets.
Sales in our Process Solutions business increased 3 percent (6 percent organic) in 2012
principally due to increased conversion to sales from backlog, partially offset by the unfavorable
impact of foreign exchange. Project orders decreased in the second half of 2012 compared to
the corresponding period in 2011 primarily driven by extension of project timing by customers
and higher than typical project orders in the fourth quarter of 2011.
Sales in our Building Solutions & Distribution businesses increased by 3 percent (4 percent
organic) in 2012 principally due to growth in our Building Solutions business reflecting
conversion to sales from backlog and increased sales volume in our Americas Distribution
business due to improved U.S. residential market conditions, partially offset by the unfavorable
impact of foreign exchange and softness in the energy retrofit business. Project orders
decreased in the fourth quarter of 2012 principally due to extension of project timing by
customers and softness in the energy retrofit business.
ACS segment profit increased by 7 percent in 2012 compared with 2011 due to a 8 percent
increase in operational segment profit and a 1 percent increase from acquisitions, net of divestitures
partially offset by a 2 percent unfavorable impact of foreign exchange. The increase in operational
segment profit is primarily the result of the positive impact from price and productivity, net of inflation.
Cost of products and services sold totaled $10.6 billion in 2012, an increase of $212 million which is
primarily due to higher sales, inflation and acquisitions, net of divestitures partially offset by the
favorable impact of foreign exchange and productivity.
2014 Areas of Focus
ACSs primary areas of focus for 2014 include:
Extending technology leadership through continued investment in new product development and
introductions which deliver energy efficiency, lowest total installed cost and integrated solutions;
Defending and extending our installed base through customer productivity, globalization,
channel optimization and service penetration;
Sustaining strong brand recognition through our brand and channel management;
Continuing to identify, execute and integrate acquisitions in or adjacent to the markets which we
serve;
Continuing to establish and grow presence and capability in high growth regions;
Continued deployment and optimization of our common ERP system;
Continued deployment and maturation of HOS; and
Continued proactive cost actions and successful execution of repositioning actions.
39
Performance Materials and Technologies (PMT)
Overview
Performance Materials and Technologies develops and manufactures high-purity, high-quality and
high-performance chemicals and materials for applications in the refining, petrochemical, automotive,
healthcare, agricultural, packaging, refrigeration, appliance, housing, semiconductor, wax and
adhesives segments. Performance Materials and Technologies includes UOP, which provides process
technology, products, including catalysts and adsorbents, and services for the petroleum refining, gas
processing, petrochemical, renewable energy and other industries. Performance Materials and
Technologies also includes Advanced Materials, which provides products including fluorocarbons,
hydrofluoroolefins, caprolactam, resins, ammonium sulfate fertilizer, phenol, specialty films, waxes,
additives, advanced fibers, customized research chemicals and intermediates, electronic materials and
chemicals, catalysts and adsorbents.
Performance Materials and Technologies operating results are principally impacted by:
Level and timing of capital spending and capacity and utilization rates in refining and
petrochemical end markets;
Pricing volatility and industry supply conditions for raw materials such as cumene, fluorspar,
R240, natural gas, perchloroethylene, sulfur and ethylene;
Impact of environmental and energy efficiency regulations;
Global supply conditions and demand for non-ozone depleting, low global warming refrigerants
and blowing agents;
Global supply conditions and demand for caprolactam, nylon resin and ammonium sulfate;
Condition of the U.S. residential housing and non-residential industries and automotive demand;
Extent of change in order rates from global semiconductor customers; and
Demand for new products including renewable energy and biofuels, low global warming
products for insulation and refrigeration, additives and enhanced nylon resin.
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,764 $6,184 9% $5,659 9%
Cost of products and services sold . . . . . . . . . 4,933 4,525 4,144
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 485 433 416
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 72 57
Segment profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,271 $1,154 10% $1,042 11%
Segment
Profit Sales
Segment
Profit
2013 vs. 2012 2012 vs. 2011
Organic growth/ Operational segment profit . . . . . . . . . . . . . 1% 3% 4% 9%
Acquisitions and divestitures, net . . . . . . . . . . . . . . . . . . . . . . . 8% 7% 6% 3%
Total % Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9% 10% 9% 11%
40
PMT sales increased by 9 percent in 2013 compared with 2012 due to 8 percent growth from
acquisitions and 1 percent increase in organic sales.
UOP sales increased by 31 percent (9 percent organic) in 2013 compared to 2012 primarily
driven by (i) the favorable impact of acquisitions, (ii) higher volume of petrochemical catalysts,
(iii) increased revenue from gas processing and (iv) increased equipment revenue in the first
half of 2013, partially offset by decreased service revenues related to scheduled project
completions and lower licensing revenues.
Advanced Materials sales decreased by 3 percent in 2013 compared to 2012 primarily driven by
(i) lower Flourine Products volume (due to the unfavorable impact of unseasonably cool weather
on refrigerant volume and planned plant outages in the first half of 2013) and price, (ii) soft end
market conditions in Electronic Materials and (iii) lower production volume in Resins and
Chemicals.
PMT segment profit increased by 10 percent in 2013 compared with 2012 due to a 7 percent
increase from acquisitions and 3 percent increase in operational segment profit. The increase in
operational segment profit is primarily due to higher UOP sales volume and positive impact of price
and productivity, net of inflation and investment for growth. Cost of products and services sold totaled
$4.9 billion in 2013, an increase of $408 million which is primarily due to acquisitions, inflation and
higher volume, partially offset by productivity.
The Company has completed upgrades to its Metropolis Works nuclear conversion facility, a
Fluorine Products facility, as required by the U.S. Nuclear Regulatory Commission (NRC). Since the
second quarter of 2012 production at the Metropolis facility had been suspended. Operations
recommenced in July 2013 after final review and approval by the NRC.
PMT sales increased by 9 percent in 2012 compared with 2011 due to 6 percent growth from
acquisitions and 4 percent increase in organic growth, partially offset by 1 percent unfavorable impact
of foreign exchange.
UOP sales increased by 17 percent (12 percent organic) in 2012 compared to 2011 primarily
driven by (i) increased equipment and licensing revenues and higher volume of petrochemical
and refining catalysts in the first nine months, reflecting continued strength in the refining and
petrochemical industries, and (ii) the favorable impact from acquisitions, partially offset by lower
service revenue related to scheduled project completions.
Advanced Materials sales increased by 5 percent (flat organic) in 2012 compared to 2011
primarily driven by an increase in Resins and Chemicals sales, primarily due to the phenol plant
acquisition; offset by lower sales in Fluorine Products primarily due to unfavorable pricing
reflecting more challenging global end market conditions and the unfavorable impact of foreign
exchange.
PMT segment profit increased by 11 percent in 2012 compared with 2011 due to a 9 percent
increase in operational segment profit (net of a 10 percent decrease in the fourth quarter due to the
factors described below) and a 3 percent increase from acquisitions partially offset by an unfavorable
impact of 1 percent in foreign exchange. The increase in operational segment profit is primarily due to
higher licensing, catalyst and equipment revenues in UOP and productivity (net of continued
investment in growth initiatives) partially offset by unfavorable pricing in Fluorine Products and Resins
and Chemicals reflecting more challenging global end market conditions. Cost of products and services
sold totaled $4.5 billion in 2012, an increase of $381 million which is primarily due to acquisitions,
higher volume and continued investment in growth initiatives partially offset by productivity and the
favorable impact of foreign exchange.
41
2014 Areas of Focus
Performance Materials and Technologies primary areas of focus for 2014 include:
Continuing to develop new processes, products and technologies that address energy efficiency,
the environment and security, as well as position the portfolio for higher value;
Commercializing new products and technologies in the petrochemical, gas processing and
refining industries, fluorochemicals and renewable energy sector;
Investing to increase plant capacity and reliability to service backlog and improve productivity
and quality through operational excellence;
Driving sales and marketing excellence and expanding local presence in high growth regions;
Managing exposure to raw material price and supply fluctuations through evaluation of
alternative sources of supply and contractual arrangements; and
Secure long-term contracts for low-global warming products.
Overview
Transportation Systems provides automotive products that improve the performance and
efficiency of cars, trucks, and other vehicles through state-of-the-art technologies, world class brands
and global solutions to customers needs. Transportation Systems products include turbochargers and
thermal systems; and friction materials (Bendix(R) and Jurid(R)) and brake hard parts. Transportation
Systems sells its products to original equipment (OE) automotive and truck manufacturers
(e.g., BMW, Caterpillar, Daimler, Renault, Ford, and Volkswagen), wholesalers and distributors and
through the retail aftermarket.
Transportation Systems operating results are principally impacted by:
Financial strength and stability of automotive OE manufacturers;
Global demand for automobile and truck production;
Turbo penetration rates for new engine platforms;
Global consumer preferences, particularly in Western Europe, for boosted diesel passenger
cars;
Degree of volatility in raw material prices, including nickel and steel;
New automobile production rates and the impact of inventory levels of automotive OE
manufacturers on demand for our products;
Regulations mandating lower emissions and improved fuel economy;
Consumers ability to obtain financing for new vehicle purchases; and
Impact of factors such as consumer confidence on automotive aftermarket demand.
Transportation systems
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,755 $3,561 5% $3,859 (8)%
Cost of products and services sold . . . . . . . . . 3,041 2,914 3,159
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158 157 160
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 58 55
Segment profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 498 $ 432 15% $ 485 (11)%
42
Segment
Profit Sales
Segment
Profit
2013 vs. 2012 2012 vs. 2011
Organic growth/ Operational segment profit . . . . . . . . . . . . . 5% 14% (3)% (4)%
Total % Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5% 15% (8)% (11)%
Transportation Systems sales increased by 5 percent in 2013 compared with 2012 primarily due to
an increase in organic sales driven by continued strong growth from new platform launches and higher
global turbo gas penetration.
Transportation Systems segment profit increased by 15 percent in 2013 compared with 2012 due
to a 14 percent increase in operational segment profit and a 1 percent favorable impact from foreign
exchange. The increase in operational segment profit is primarily due to increased productivity (most
significantly the positive impacts from material productivity in Turbo Technologies and ongoing projects
to drive operational improvement in the Friction Materials business), partially offset by unfavorable
pricing. Cost of products and services sold totaled $3.0 billion in 2013, an increase of $127 million
which is primarily a result of increased volume, partially offset by increased productivity.
In January 2014, the Company entered into a definitive agreement to sell its Friction Materials
business unit to Federal Mogul Corporation for approximately $155 million. See Note 2 Acquisitions
and Divestitures for further details.
Transportation Systems sales decreased by 8 percent in 2012 compared with the 2011 primarily
due to an unfavorable impact from foreign exchange of 5 percent and a decrease in organic sales of 3
percent. Lower sales were primarily driven by decreased light vehicle production in Europe and lower
aftermarket sales partially offset by new platform launches, including higher turbo gas penetration in
North America.
Transportation Systems segment profit decreased by 11 percent in 2012 compared with 2011 due
to a 7 percent unfavorable impact from foreign exchange and a 4 percent decrease in operational
segment profit. The decrease in operational segment profit is primarily due to decreased volume and
unfavorable pricing, substantially offset by productivity (net of the impact of ongoing projects to drive
operational improvement in the Friction Materials business), net of inflation. Cost of products and
services sold totaled $2.9 billion in 2012, a decrease of $235 million which is primarily a result of
foreign exchange, decreased volume and increased productivity.
2014 Areas of Focus
Transportation Systems primary areas of focus in 2014 include:
Sustaining superior turbocharger technology through successful platform launches;
Maintaining the high quality of current products while executing new product introductions;
Increasing global penetration and share of diesel and gasoline turbocharger OEM demand;
Reducing manufacturing costs through increasing plant productivity and an improving global
manufacturing footprint;
Aligning cost structure with current economic outlook, and successful execution of repositioning
actions; and
Aligning development efforts and costs with new turbo platform launch schedules.
43
Repositioning and Other Charges
See Note 3 Repositioning and Other Charges of Notes to the Financial Statements for a
discussion of repositioning and other charges incurred in 2013, 2012, and 2011. Our repositioning
actions are expected to generate incremental pretax savings of approximately $150 million in 2014
compared with 2013 principally from planned workforce reductions. Cash expenditures for severance
and other exit costs necessary to execute our repositioning actions were $160, $136, and $159 million
in 2013, 2012, and 2011, respectively. Such expenditures for severance and other exit costs have
been funded through operating cash flows. Cash expenditures for severance and other costs
necessary to execute the remaining actions are expected to be approximately $175 million in 2014 and
will be funded through operating cash flows.
The following tables provide details of the pretax impact of total net repositioning and other
charges by segment.
2013 2012 2011
Aerospace
Net repositioning charge . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45 $ (5) $ 29
Net repositioning charge . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 90 $ 18 $191
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
$ 93 $ 18 $191
Net repositioning charge . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31 $ 12 $ 41
Net repositioning charge . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26 $ 28 $ 82
Asbestos related litigation charges, net of insurance . 164 169 146
$190 $197 $228
Corporate
Net repositioning charge . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9 $ $ 11
Asbestos related litigation charges, net of insurance . 17 (13) 3
Probable and reasonably estimable environmental
liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272 234 240
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
$304 $221 $254
44
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to manage its businesses to maximize operating cash flows as the
primary source of liquidity. In addition to our available cash and operating cash flows, additional
sources of liquidity include committed credit lines, short-term debt from the commercial paper market,
long-term borrowings, and access to the public debt and equity markets, as well as the ability to sell
trade accounts receivables. We continue to balance our cash and financing uses through investment in
our existing core businesses, acquisition activity, share repurchases and dividends.
Cash Flow Summary
Our cash flows from operating, investing and financing activities, as reflected in the Consolidated
Statement of Cash Flows for the years ended 2013, 2012 and 2011, are summarized as follows:
2013 2012 2011
Cash provided by (used for):
Operating activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,335 $ 3,517 $ 2,833
Investing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,959) (1,428) (611)
Financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (433) (1,206) (1,114)
Effect of exchange rate changes on cash . . . . . . . . . . . . . . . (155) 53 (60)
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . $ 1,788 $ 936 $ 1,048
Cash provided by operating activities increased by $818 million during 2013 compared with 2012
primarily due to (i) reduced cash contributions to our pension plans of $883 million, (ii) a $447 million
increase of net income before the non-cash pension mark-to-market adjustment, (iii) a $135 million
favorable impact from working capital (driven by improved accounts payable performance and
inventory, partially offset by higher receivables primarily due to sales growth and timing of sales),
partially offset by higher cash tax payments of approximately $352 million and a $260 million increase
in net payments for repositioning and other charges (most significantly the NARCO Trust establishment
payments of $164 million).
Cash used for investing activities increased by $531 million during 2013 compared with 2012
primarily due to an increase in cash paid for acquisitions of $695 million (most significantly Intermec
and RAE), partially offset by an increase of approximately $190 million in settlement receipts of foreign
currency exchange contracts used as economic hedges on certain non-functional currency
denominated monetary assets and liabilities.
Cash used for financing activities decreased by $773 million during 2013 compared to 2012
primarily due to an increase in the net proceeds from debt issuances of $1,462 million, partially offset
by an increase in net repurchases of common stock of $651 million and an increase in cash dividends
paid of $142 million.
Cash provided by operating activities increased by $684 million during 2012 compared with 2011
primarily due to reduced cash contributions to our pension plans of $706 million and a $342 million
increase of net income before the non-cash pension mark-to-market adjustment, partially offset by
higher cash tax payments of approximately $340 million.
Cash used for investing activities increased by $817 million during 2012 compared with 2011
primarily due to (i) a decrease in proceeds from sales of businesses of $1,135 million (most
significantly the divestiture of the Consumer Products Group business and the automotive on-board
sensor products business within our Automation and Control Solutions segment in 2011), (ii) a net
$117 million increase in investments (primarily short-term marketable securities), and (iii) an increase
in expenditures for property, plant and equipment of $86 million, partially offset by a decrease in cash
paid for acquisitions of $535 million.
45
Cash used for financing activities increased by $92 million during 2012 compared with 2011
primarily due to a decrease in the net proceeds from debt issuances of $825 million and an increase in
dividends paid of $120 million, partially offset by a decrease of $806 million in net repurchases of
common stock and a decrease of $33 million in the payment of debt assumed with acquisitions.
Liquidity
Each of our businesses is focused on implementing strategies to increase operating cash flows
through revenue growth, margin expansion and improved working capital turnover. Considering the
current economic environment in which each of the businesses operate and their business plans and
strategies, including the focus on growth, cost reduction and productivity initiatives, the Company
believes that cash balances and operating cash flows are the principal source of liquidity. In addition to
the available cash and operating cash flows, additional sources of liquidity include committed credit
lines, short-term debt from the commercial paper markets, long-term borrowings, and access to the
public debt and equity markets, as well as the ability to sell trade accounts receivables. At December
31, 2013, a substantial portion of the Companys cash and cash equivalents were held by foreign
subsidiaries. If the amounts held outside of the U.S. were to be repatriated, under current law, they
would be subject to U.S. federal income taxes, less applicable foreign tax credits. However, our intent
is to permanently reinvest these funds outside of the U.S. It is not practicable to estimate the amount of
tax that might be payable if some or all of such earnings were to be repatriated, and the amount of
foreign tax credits that would be available to reduce or eliminate the resulting U.S. income tax liability.
We monitor the third-party depository institutions that hold our cash and cash equivalents on a
daily basis. Our emphasis is primarily on safety of principal and secondarily on maximizing yield on
those funds. We diversify our cash and cash equivalents among counterparties to minimize exposure
to any one of these entities.
Global economic conditions or a tightening of credit markets could adversely affect our customers
or suppliers ability to obtain financing, particularly in our long-cycle businesses and airline, automotive
and refining/petrochemical end markets. Customer or supplier bankruptcies, delays in their ability to
obtain financing, or the unavailability of financing could adversely affect our cash flow or results of
operations. To date we have not experienced material impacts from customer or supplier bankruptcy or
liquidity issues. We continue to monitor and take measures to limit our exposure.
A source of liquidity is our ability to issue short-term debt in the commercial paper market.
Commercial paper notes are sold at a discount and have a maturity of not more than 365 days from
date of issuance. Borrowings under the commercial paper program are available for general corporate
purposes as well as for financing acquisitions. There was $1,299 million of commercial paper
outstanding at December 31, 2013.
Our ability to access the commercial paper market, and the related cost of these borrowings, is
affected by the strength of our credit rating and market conditions. Our credit ratings are periodically
reviewed by the major independent debt-rating agencies. As of December 31, 2013, Standard and
Poors (S&P), Fitch, and Moodys have ratings on our long-term debt of A, A and A2 respectively, and
short-term debt of A-1, F1 and P1 respectively. S&P, Fitch and Moodys have Honeywells rating
outlook as stable. To date, the Company has not experienced any limitations in our ability to access
these sources of liquidity.
We also have a current shelf registration statement filed with the Securities and Exchange
Commission under which we may issue additional debt securities, common stock and preferred stock
that may be offered in one or more offerings on terms to be determined at the time of the offering. Net
proceeds of any offering would be used for general corporate purposes, including repayment of
existing indebtedness, capital expenditures and acquisitions.
As a source of liquidity, we sell interests in designated pools of trade accounts receivables to third
parties. As of December 31, 2013 and 2012, none of the receivables in the designated pools had been
sold to third parties. When we sell receivables, they are over-collateralized and we retain a
subordinated interest in the pool of receivables representing that over-collateralization as well as an
undivided interest in the balance of the receivables pools. The terms of the trade accounts receivable
46
program permit the repurchase of receivables from the third parties at our discretion, providing us with
an additional source of revolving credit. As a result, program receivables remain on the Companys
balance sheet with a corresponding amount recorded as Short-term borrowings.
In March 2013, the Company repaid $600 million of its 4.25 percent notes.
In November 2013, the Company issued $300 million 3.35 percent Senior Notes due 2023 and
$700 million Floating Rate Senior Notes due 2015 (collectively, the Notes). The Notes are senior
unsecured and unsubordinated obligations of Honeywell and rank equally with all of Honeywells
existing and future senior unsecured debt and senior to all of Honeywells subordinated debt. The
offering resulted in gross proceeds of $1 billion, offset by $7 million in discount and closing costs
related to the offering.
On December 10, 2013, the Company entered into a $4 billion Amended and Restated Five Year
Credit Agreement (Credit Agreement) with a syndicate of banks. Commitments under the Credit
Agreement can be increased pursuant to the terms of the Credit Agreement to an aggregate amount
not to exceed $4.5 billion. The Credit Agreement contains a $700 million sublimit for the issuance of
letters of credit. The Credit Agreement is maintained for general corporate purposes and amends and
restates the previous $3 billion five year credit agreement dated April 2, 2012 (Prior Agreement).
There have been no borrowings under the Credit Agreement or the Prior Agreement.
During 2013, the Company repurchased $1,073 million of outstanding shares to offset the dilutive
impact of employee stock based compensation plans, including option exercises, restricted unit vesting
and matching contributions under our savings plans (see Part II, Item 5 for share repurchases in the
fourth quarter of 2013). In December 2013, the Board of Directors authorized the repurchase of up to a
total of $5 billion of Honeywell common stock.
On June 3, 2013, the Company acquired RAE, a global manufacturer of fixed and portable gas
and radiation detection systems, and software. The aggregate value, net of cash acquired, was $338
million. The acquisition was funded with available cash. See Acquisitions in Note 2 to the financial
statements for further discussion.
On September 17, 2013, the Company acquired 100 percent of the issued and outstanding shares
of Intermec, a leading provider of mobile computing, radio frequency identification solutions and bar
code, label and receipt printers for use in warehousing, supply chain, field service and manufacturing
environments. Intermec was a U.S. public company that operated globally and had reported 2012
revenues of $790 million. The aggregate value, net of cash acquired, was $607 million. The acquisition
was funded with the issuance of commercial paper. See Acquisitions in Note 2 to the financial
statements for further discussion.
In January 2014, the Company entered into a definitive agreement to sell its Friction Materials
business to Federal Mogul Corporation for approximately $155 million. The transaction, subject to
required regulatory approvals and applicable information and consultation requirements, is expected to
close in the second half of 2014. See Divestitures in Note 2 to the financial statements for further
discussion.
In 2013, we were not required to make contributions to our U.S. pension plans. During 2013, cash
contributions of $156 million were made to our non-U.S. plans to satisfy regulatory funding standards.
The NARCO Plan of Reorganization went into effect on April 30, 2013. In 2013, the Company
made NARCO Trust establishment payments of $164 million. See Asbestos Matters in Note 22 to the
financial statements for further discussion of possible funding obligations in 2014 related to the
NARCO Trust.
In addition to our normal operating cash requirements, our principal future cash requirements will
be to fund capital expenditures, dividends, strategic acquisitions, share repurchases, employee benefit
obligations, environmental remediation costs, asbestos claims, severance and exit costs related to
repositioning actions and debt repayments.
Specifically, we expect our primary cash requirements in 2014 to be as follows:
47
Capital expenditureswe expect to spend approximately $1.2 billion for capital expenditures in
2014 primarily for growth, production and capacity expansion, cost reduction, maintenance, and
replacement.
Share repurchasesunder the Companys share repurchase program, $5 billion is available as
of December 31, 2013 for additional share repurchases. Honeywell presently expects to
repurchase outstanding shares from time to time to offset the dilutive impact of employee stock-
based compensation plans, including future option exercises, restricted unit vesting and
matching contributions under our savings plans. The amount and timing of future repurchases
may vary depending on market conditions and the level of operating, financing and other
investing activities.
Dividendswe increased our dividend rate by 10 percent to $.45 per share of common stock
effective with the fourth quarter 2013 dividend. The Company intends to continue to pay
quarterly dividends in 2014.
Asbestos claimswe expect our cash spending for asbestos claims and our cash receipts for
related insurance recoveries to be approximately $459 and $76 million, respectively, in 2014.
See Asbestos Matters in Note 22 to the financial statements for further discussion of possible
funding obligations in 2014 related to the NARCO Trust.
Pension contributionsin 2014, we are not required to make contributions to our U.S. pension
plans. We plan to make contributions of cash and/or marketable securities of approximately
$150 million ($117 million of marketable securities were contributed in January 2014) to our non-
U.S. plans to satisfy regulatory funding standards. The timing and amount of contributions to
both our U.S. and non-U.S. plans may be impacted by a number of factors, including the funded
status of the plans.
Repositioning actionswe expect that cash spending for severance and other exit costs
necessary to execute repositioning actions will approximate $175 million in 2014.
Environmental remediation costswe expect to spend approximately $300 million in 2014 for
remedial response and voluntary clean-up costs. See Environmental Matters in Note 22 to the
financial statements for additional information.
We continuously assess the relative strength of each business in our portfolio as to strategic fit,
market position, profit and cash flow contribution in order to upgrade our combined portfolio and
identify business units that will most benefit from increased investment. We identify acquisition
candidates that will further our strategic plan and strengthen our existing core businesses. We also
identify businesses that do not fit into our long-term strategic plan based on their market position,
relative profitability or growth potential. These businesses are considered for potential divestiture,
restructuring or other repositioning actions subject to regulatory constraints. In 2013 and 2012, we
realized $3 and $21 million, respectively, in cash proceeds from sales of non-strategic businesses.
Based on past performance and current expectations, we believe that our operating cash flows will
be sufficient to meet our future operating cash needs. Our available cash, committed credit lines,
access to the public debt and equity markets as well as our ability to sell trade accounts receivables,
provide additional sources of short-term and long-term liquidity to fund current operations, debt
maturities, and future investment opportunities.
Contractual Obligations and Probable Liability Payments
Following is a summary of our significant contractual obligations and probable liability payments at
December 31, 2013:
48
Total(6) 2014
2015-
2016
2017-
2018 Thereafter
Payments by Period
Long-term debt, including capitalized
leases(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,433 $ 632 $1,328 $1,343 $4,130
Interest payments on long-term debt,
including capitalized leases . . . . . . . . . . . . 3,664 315 591 494 2,264
Minimum operating lease payments . . . . . . 1,244 313 440 227 264
Purchase obligations(2) . . . . . . . . . . . . . . . . . . 1,626 796 502 248 80
Estimated environmental liability
payments(3) . . . . . . . . . . . . . . . . . . . . . . . . . . 643 304 230 80 29
Asbestos related liability payments(4) . . . . 1,611 461 630 401 119
Asbestos insurance recoveries(5) . . . . . . . . (672) (77) (140) (148) (307)
$15,549 $2,744 $3,581 $2,645 $6,579
(1) Assumes all long-term debt is outstanding until scheduled maturity.
(2) Purchase obligations are entered into with various vendors in the normal course of business and
are consistent with our expected requirements.
(3) The payment amounts in the table only reflect the environmental liabilities which are probable and
reasonably estimable as of December 31, 2013. See Environmental Matters in Note 22
Commitments and Contingencies of Notes to the Financial Statements for additional information.
(4) These amounts are estimates of asbestos related cash payments for NARCO and Bendix based
on our asbestos related liabilities which are probable and reasonably estimable as of December 31,
2013. We have accrued for the estimated value of future NARCO asbestos related claims expected
to be asserted against the NARCO Trust through 2018. In light of the uncertainties inherent in
making long-term projections and in connection with the initial operation of a 524(g) trust, as well
as the stay of all NARCO asbestos claims from January 2002 until April 2013 when the NARCO
Plan of Reorganization became fully effective, we do not believe that we have a reasonable basis
for estimating NARCO asbestos claims beyond 2018. Projecting future events is subject to many
uncertainties that could cause asbestos liabilities to be higher or lower than those projected and
recorded. See Asbestos Matters in Note 22 Commitments and Contingencies of Notes to the
Financial Statements for additional information.
(5) These amounts represent our insurance recoveries that are deemed probable for asbestos related
liabilities as of December 31, 2013. The timing of insurance recoveries are impacted by the terms
of insurance settlement agreements, as well as the documentation, review and collection process
required to collect on insurance claims. Where probable insurance recoveries are not subject to
definitive settlement agreements with specified payment dates, but instead are covered by
insurance policies, we have assumed collection will occur beyond 2018. Projecting the timing of
insurance recoveries is subject to many uncertainties that could cause the amounts collected to be
higher or lower than those projected and recorded or could cause the timing of collections to be
earlier or later than that projected. We reevaluate our projections concerning insurance recoveries
in light of any changes or developments that would impact recoveries or the timing thereof. See
Asbestos Matters in Note 22 Commitments and Contingencies of Notes to the Financial
Statements for additional information.
(6) The table excludes tax effects as well as $729 million of uncertain tax positions. See Note 6
Income Taxes of Notes to the Financial Statements for additional information.
The table also excludes our pension and other postretirement benefits (OPEB) obligations. In
2014, we are not required to make contributions to our U.S. pension plans, however, we plan to make
contributions of cash and/or marketable securities of approximately $150 million ($117 million of
marketable securities were contributed in January 2014) to our non-U.S. plans to satisfy regulatory
funding standards. The timing and amount of contributions to both our U.S. and non-U.S. plans may be
impacted by a number of factors, including the funded status of the plans. Beyond 2014, the actual
amounts required to be contributed are dependent upon, among other things, interest rates, underlying
49
asset returns and the impact of legislative or regulatory actions related to pension funding obligations.
Payments due under our OPEB plans are not required to be funded in advance, but are paid as
medical costs are incurred by covered retiree populations, and are principally dependent upon the
future cost of retiree medical benefits under our plans. We expect our OPEB payments to approximate
$130 million in 2014 net of the benefit of approximately $11 million from the Medicare prescription
subsidy. See Note 23 to the financial statements for further discussion of our pension and OPEB plans.
The noncontrolling interest shareholder of UOP Russell LLC (formerly Thomas Russell Co.), one
of our subsidiaries, has put rights that may be exercised causing us to purchase their equity interests
beginning January 1, 2016 through December 31, 2016. The same interest is subject to certain call
rights by the Company. As the amount paid is based on operating income performance from 2013 to
2015, the actual settlement amount may be different and has therefore been excluded from this table.
Off-Balance Sheet Arrangements
Following is a summary of our off-balance sheet arrangements:
GuaranteesWe have issued or are a party to the following direct and indirect guarantees at
December 31, 2013:
Maximum
Potential
Future
Payments
Operating lease residual values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $40
Other third parties financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Customer financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
$49
We do not expect that these guarantees will have a material adverse effect on our consolidated
results of operations, financial position or liquidity.
In connection with the disposition of certain businesses and facilities we have indemnified the
purchasers for the expected cost of remediation of environmental contamination, if any, existing on the
date of disposition. Such expected costs are accrued when environmental assessments are made or
remedial efforts are probable and the costs can be reasonably estimated.
Environmental Matters
We are subject to various federal, state, local and foreign government requirements relating to the
protection of the environment. We believe that, as a general matter, our policies, practices and
procedures are properly designed to prevent unreasonable risk of environmental damage and personal
injury and that our handling, manufacture, use and disposal of hazardous substances are in
accordance with environmental and safety laws and regulations. However, mainly because of past
operations and operations of predecessor companies, we, like other companies engaged in similar
businesses, have incurred remedial response and voluntary cleanup costs for site contamination and
are a party to lawsuits and claims associated with environmental and safety matters, including past
involving environmental matters are likely to continue to arise in the future.
With respect to environmental matters involving site contamination, we continually conduct
studies, individually or jointly, with other potentially responsible parties, to determine the feasibility of
various remedial techniques to address environmental matters. It is our policy (see Note 1 to the
financial statements) to record appropriate liabilities for environmental matters when remedial efforts or
damage claim payments are probable and the costs can be reasonably estimated. Such liabilities are
based on our best estimate of the undiscounted future costs required to complete the remedial work.
The recorded liabilities are adjusted periodically as remediation efforts progress or as additional
technical or legal information becomes available. Given the uncertainties regarding the status of laws,
regulations, enforcement policies, the impact of other potentially responsible parties, technology and
information related to individual sites, we do not believe it is possible to develop an estimate of the
50
range of reasonably possible environmental loss in excess of our recorded liabilities. We expect to fund
expenditures for these matters from operating cash flow. The timing of cash expenditures depends on
a number of factors, including the timing of litigation and settlements of remediation liability, personal
injury and property damage claims, regulatory approval of cleanup projects, execution timeframe of
projects, remedial techniques to be utilized and agreements with other parties.
Remedial response and voluntary cleanup costs charged against pretax earnings were $272, $234
and $240 million in 2013, 2012 and 2011, respectively. At December 31, 2013 and 2012, the recorded
liabilities for environmental matters was $643 and $654 million, respectively. In addition, in 2013 and
2012 we incurred operating costs for ongoing businesses of approximately $88 and $84 million,
respectively, relating to compliance with environmental regulations.
Remedial response and voluntary cleanup payments were $304, $320 and $270 million in 2013,
2012 and 2011, respectively, and are currently estimated to be approximately $300 million in 2014. We
expect to fund such expenditures from operating cash flow.
Although we do not currently possess sufficient information to reasonably estimate the amounts of
liabilities to be recorded upon future completion of studies, litigation or settlements, and neither the
timing nor the amount of the ultimate costs associated with environmental matters can be determined,
they could be material to our consolidated results of operations or operating cash flows in the periods
recognized or paid. However, considering our past experience and existing reserves, we do not expect
that environmental matters will have a material adverse effect on our consolidated financial position.
See Note 22 Commitments and Contingencies of Notes to the Financial Statements for a
discussion of our commitments and contingencies, including those related to environmental matters
and toxic tort litigation.
Financial Instruments
As a result of our global operating and financing activities, we are exposed to market risks from
changes in interest and foreign currency exchange rates and commodity prices, which may adversely
affect our operating results and financial position. We minimize our risks from interest and foreign
currency exchange rate and commodity price fluctuations through our normal operating and financing
activities and, when deemed appropriate, through the use of derivative financial instruments. We do
not use derivative financial instruments for trading or other speculative purposes and do not use
leveraged derivative financial instruments. A summary of our accounting policies for derivative financial
instruments is included in Note 1 Summary of Significant Accounting Policies of Notes to the Financial
Statements. We also hold investments in marketable equity securities, which exposes us to market
volatility, as discussed in Note 16 Financial Instruments and Fair Value Measures of Notes to the
Financial Statements.
We conduct our business on a multinational basis in a wide variety of foreign currencies. Our
exposure to market risk from changes in foreign currency exchange rates arises from international
financing activities between subsidiaries, foreign currency denominated monetary assets and liabilities
and anticipated transactions arising from international trade. Our objective is to preserve the economic
value of non-functional currency cash flows. We attempt to hedge transaction exposures with natural
offsets to the fullest extent possible and, once these opportunities have been exhausted, through
foreign currency forward and option agreements with third parties. Our principal currency exposures
relate to the U.S. Dollar, Euro, Canadian Dollar, British Pound, Mexican Peso, Indian Rupee, Chinese
Renminbi, Czech Koruna, Hong Kong Dollar, Korean Won, Singapore Dollar, Swiss Franc, United Arab
Emirates Dirham, Swedish Krona, Thai Baht and Romanian Leu.
Our exposure to market risk from changes in interest rates relates primarily to our net debt and
pension obligations. As described in Note 14 Long-term Debt and Credit Agreements and Note 16
Financial Instruments and Fair Value Measures of Notes to the Financial Statements, we issue both
fixed and variable rate debt and use interest rate swaps to manage our exposure to interest rate
movements and reduce overall borrowing costs.
Financial instruments, including derivatives, expose us to counterparty credit risk for nonperfor-
mance and to market risk related to changes in interest and foreign currency exchange rates and
51
commodity prices. We manage our exposure to counterparty credit risk through specific minimum
credit standards, diversification of counterparties, and procedures to monitor concentrations of credit
risk. Our counterparties are substantial investment and commercial banks with significant experience
using such derivative instruments. We monitor the impact of market risk on the fair value and expected
future cash flows of our derivative and other financial instruments considering reasonably possible
changes in interest and currency exchange rates and restrict the use of derivative financial instruments
to hedging activities.
The following table illustrates the potential change in fair value for interest rate sensitive
instruments based on a hypothetical immediate one-percentage-point increase in interest rates across
all maturities, the potential change in fair value for foreign exchange rate sensitive instruments based
on a 10 percent weakening of the U.S. dollar versus local currency exchange rates across all
maturities, and the potential change in fair value of contracts hedging commodity purchases based on
a 20 percent decrease in the price of the underlying commodity across all maturities at December 31,
2013 and 2012.
Face or
Notional
Amount
Carrying
Value(1)
Fair
Value(1)
Estimated
Increase
(Decrease)
in Fair
Value(2)
December 31, 2013
Interest Rate Sensitive Instruments
Long-term debt (including current maturities) . . . . . . . . . . . . $7,433 $(7,433) $(8,066) $(466)
Interest rate swap agreements . . . . . . . . . . . . . . . . . . . . . . . . . 1,700 55 55 (77)
Foreign Exchange Rate Sensitive Instruments
Foreign currency exchange contracts(3). . . . . . . . . . . . . . . . . 7,298 (7) (7) 296
Commodity Price Sensitive Instruments
Forward commodity contracts(4) . . . . . . . . . . . . . . . . . . . . . . . . 1
December 31, 2012
Interest Rate Sensitive Instruments
Long-term debt (including current maturities) . . . . . . . . . . . . $7,020 $(7,020) $(8,152) $(555)
Interest rate swap agreements . . . . . . . . . . . . . . . . . . . . . . . . . 1,400 146 146 (67)
Foreign Exchange Rate Sensitive Instruments
Foreign currency exchange contracts(3). . . . . . . . . . . . . . . . . 8,506 20 20 361
Commodity Price Sensitive Instruments
Forward commodity contracts(4) . . . . . . . . . . . . . . . . . . . . . . . . 17 (3)
(1) Asset or (liability).
(2) A hypothetical immediate one percentage point decrease in interest rates across all maturities, a
potential change in fair value of foreign exchange rate sensitive instruments based on a 10 percent
strengthening of the U.S. dollar versus local currency exchange rates across all maturities, and a
potential change in fair value of contracts hedging commodity purchases based on a 20 percent
increase in the price of the underlying commodity across all maturities will result in a change in fair
value equal to the inverse of the amount disclosed in the table.
(3) Changes in the fair value of foreign currency exchange contracts are offset by changes in the fair
value or cash flows of underlying hedged foreign currency transactions.
(4) Changes in the fair value of forward commodity contracts are offset by changes in the cash flows
of underlying hedged commodity transactions.
The above discussion of our procedures to monitor market risk and the estimated changes in fair
value resulting from our sensitivity analyses are forward-looking statements of market risk assuming
certain adverse market conditions occur. Actual results in the future may differ materially from these
estimated results due to actual developments in the global financial markets. The methods used by us
to assess and mitigate risk discussed above should not be considered projections of future events.
52
CRITICAL ACCOUNTING POLICIES
The preparation of our consolidated financial statements in accordance with generally accepted
accounting principles is based on the selection and application of accounting policies that require us to
make significant estimates and assumptions about the effects of matters that are inherently uncertain.
We consider the accounting policies discussed below to be critical to the understanding of our financial
statements. Actual results could differ from our estimates and assumptions, and any such differences
could be material to our consolidated financial statements.
We have discussed the selection, application and disclosure of these critical accounting policies
with the Audit Committee of our Board of Directors and our Independent Registered Public
Accountants. New accounting standards effective in 2013 which had a material impact on our
consolidated financial statements are described in the Recent Accounting Pronouncements section in
Note 1 Summary of Significant Accounting Policies of Notes to the Financial Statements.
Contingent LiabilitiesWe are subject to a number of lawsuits, investigations and claims (some
of which involve substantial dollar amounts) that arise out of the conduct of our global business
operations or those of previously owned entities, including matters relating to commercial transactions,
government contracts, product liability (including asbestos), prior acquisitions and divestitures,
employee benefit plans, intellectual property, and environmental, health and safety matters. We
recognize a liability for any contingency that is probable of occurrence and reasonably estimable. We
continually assess the likelihood of any adverse judgments or outcomes to our contingencies, as well
as potential amounts or ranges of probable losses, and recognize a liability, if any, for these
contingencies based on a careful analysis of each matter with the assistance of outside legal counsel
and, if applicable, other experts. Such analysis includes making judgments concerning matters such as
the costs associated with environmental matters, the outcome of negotiations, the number and cost of
pending and future asbestos claims, and the impact of evidentiary requirements. Because most
contingencies are resolved over long periods of time, liabilities may change in the future due to new
developments (including new discovery of facts, changes in legislation and outcomes of similar cases
through the judicial system), changes in assumptions or changes in our settlement strategy. For a
discussion of our contingencies related to environmental, asbestos and other matters, including
managements judgment applied in the recognition and measurement of specific liabilities, see Notes 1
Summary of Significant Accounting Policies and 22 Commitments and Contingencies of Notes to the
Financial Statements.
Asbestos Related Contingencies and Insurance RecoveriesWe are a defendant in personal
injury actions related to products containing asbestos (refractory and friction products). We recognize a
liability for any asbestos related contingency that is probable of occurrence and reasonably estimable.
Regarding North American Refractories Company (NARCO) asbestos related claims, we accrued for
pending claims based on terms and conditions in agreements with NARCO, its former parent company,
and certain asbestos claimants, and an estimate of the unsettled claims pending as of the time
NARCO filed for bankruptcy protection. We also accrued for the estimated value of future NARCO
asbestos related claims expected to be asserted against the NARCO Trust through 2018 as described
in Note 22 Commitments and Contingencies of Notes to the Financial Statements. In light of the
inherent uncertainties in making long term projections and in connection with the initial operation of a
524(g) trust, as well as the stay of all NARCO asbestos claims from January 2002 through the effective
date of the NARCO Trust on April 30, 2013, we do not believe that we have a reasonable basis for
estimating NARCO asbestos claims beyond 2018. Regarding Bendix asbestos related claims, we
accrued for the estimated value of pending claims using average resolution values for the previous five
years. We also accrued for the estimated value of future anticipated claims related to Bendix for the
next five years based on historic claims filing experience and dismissal rates, disease classifications,
and average resolution values in the tort system for the previous five years. In light of the uncertainties
inherent in making long-term projections, as well as certain factors unique to friction product asbestos
claims, we do not believe that we have a reasonable basis for estimating asbestos claims beyond the
next five years. We will continue to update the resolution values used to estimate the cost of pending
and future Bendix claims during the fourth quarter each year. For additional information see Note 22
Commitments and Contingencies of Notes to the Financial Statements. We continually assess the
likelihood of any adverse judgments or outcomes to our contingencies, as well as potential ranges of
53
probable losses and recognize a liability, if any, for these contingencies based on an analysis of each
individual issue with the assistance of outside legal counsel and, if applicable, other experts.
In connection with the recognition of liabilities for asbestos related matters, we record asbestos
related insurance recoveries that are deemed probable. In assessing the probability of insurance
recovery, we make judgments concerning insurance coverage that we believe are reasonable and
consistent with our historical dealings and our knowledge of any pertinent solvency issues surrounding
insurers. Our insurance is with both the domestic insurance market and the London excess market.
While the substantial majority of our insurance carriers are solvent, some of our individual carriers are
insolvent, which has been considered in our analysis of probable recoveries. Projecting future events is
subject to various uncertainties that could cause the insurance recovery on asbestos related liabilities
to be higher or lower than that projected and recorded. Given the inherent uncertainty in making future
projections, we reevaluate our projections concerning our probable insurance recoveries in light of any
changes to the projected liability, our recovery experience or other relevant factors that may impact
future insurance recoveries. See Note 22 Commitments and Contingencies of Notes to the Financial
Statements for a discussion of managements judgments applied in the recognition and measurement
of insurance recoveries for asbestos related liabilities.
Defined Benefit Pension PlansWe sponsor both funded and unfunded U.S. and non-U.S.
defined benefit pension plans covering the majority of our employees and retirees.
We recognize net actuarial gains or losses in excess of 10 percent of the greater of the fair value
of plan assets or the plans projected benefit obligation (the corridor) annually in the fourth quarter each
year (MTM Adjustment) and, if applicable, in any quarter in which an interim remeasurement is
triggered. Net actuarial gains and losses occur when the actual experience differs from any of the
various assumptions used to value our pension plans or when assumptions change as they may each
year. The primary factors contributing to actuarial gains and losses are changes in the discount rate
used to value pension obligations as of the measurement date each year and the difference between
expected and actual returns on plan assets. This accounting method results in the potential for volatile
and difficult to forecast MTM Adjustments. MTM charges were $51, $957 and $1,802 million in 2013,
2012 and 2011, respectively. The remaining components of pension income/expense, primarily service
and interest costs and assumed return on plan assets, are recorded on a quarterly basis (Pension
ongoing (income) expense).
For financial reporting purposes, net periodic pension income/expense is calculated based upon a
number of actuarial assumptions, including a discount rate for plan obligations and an expected long-
term rate of return on plan assets. We determine the expected long-term rate of return on plan assets
utilizing historical plan asset returns over varying long-term periods combined with our expectations on
future market conditions and asset mix considerations (see Note 23 Pension and Other Postretirement
Benefits of Notes to the Financial Statements for details on the actual various asset classes and
targeted asset allocation percentages for our pension plans). The discount rate reflects the market rate
on December 31 (measurement date) for high-quality fixed-income investments with maturities
corresponding to our benefit obligations and is subject to change each year. Information on all our
significant actuarial assumptions is included in Note 23 Pension and Other Postretirement Benefits of
Notes to the Financial Statements.
The key assumptions used in developing our 2013, 2012 and 2011 net periodic pension expense
for our U.S. plans included the following:
2013 2012 2011
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.06% 4.89% 5.25%
Assets:
Expected rate of return. . . . . . . . . . . . . . . . . . . . . . . . . . 7.75% 8% 8%
Actual rate of return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23% 13%
Actual 10 year average annual compounded rate
of return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8% 8% 6%
The discount rate can be volatile from year to year as it is determined based upon prevailing
interest rates as of the measurement date. We will use a 4.89 percent discount rate in 2014, reflecting
the increase in the market interest rate environment since December 31, 2012. We plan to continue to
54
use an expected rate of return on plan assets of 7.75 percent for 2014 as this is a long-term rate based
on historical plan asset returns over varying long term periods combined with our expectations on
future market conditions and the asset mix of the plans investments.
In addition to the potential for MTM Adjustments, changes in our expected rate of return on plan
assets and discount rate resulting from economic events also affects future pension ongoing (income)
expense. The following table highlights the sensitivity of our U.S. pension obligations and ongoing
(income) expense to changes in these assumptions, assuming all other assumptions remain constant.
These estimates exclude any potential MTM Adjustment:
Change in Assumption
Impact on 2014
Pension Ongoing
Expense Impact on PBO
0.25 percentage point decrease in discount rate . . Decrease $4 million Increase $529 million
0.25 percentage point increase in discount rate . . . Increase $3 million Decrease $512 million
0.25 percentage point decrease in expected rate
of return on assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase $40 million
0.25 percentage point increase in expected rate
of return on assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease $40 million
Pension ongoing income for all of our pension plans is expected to be approximately $230 million
in 2014 compared with pension ongoing income of $90 million in 2013. The increase in pension
ongoing income in 2014 compared with 2013 results primarily from an increase in the plans assets at
December 31, 2013 compared with December 31, 2012 mainly due to strong asset returns in 2013.
Also, if required, an MTM Adjustment will be recorded in the fourth quarter of 2014 in accordance with
our pension accounting method as previously described. It is difficult to reliably forecast or predict
whether there will be a MTM Adjustment in 2014, and if one is required what the magnitude of such
adjustment will be. MTM Adjustments are primarily driven by events and circumstances beyond the
control of the Company such as changes in interest rates and the performance of the financial
markets.
In 2013, 2012 and 2011, we were not required to make contributions to satisfy minimum statutory
funding requirements in our U.S. pension plans and did not make a contribution to our U.S. plans
during 2013. However, we made voluntary contributions of $792 and $1,650 million to our U.S. pension
plans in 2012 and 2011, respectively, primarily to improve the funded status of our plans which had
been adversely impacted by relatively low discount rates and asset losses in 2011 and 2008 resulting
from the poor performance of the equity markets. In 2014, we are not required to make contributions to
our U.S. pension plans. We plan to make contributions of cash and/or marketable securities of
approximately $150 million ($117 million of marketable securities were contributed in January 2014) to
our non-U.S. plans to satisfy regulatory funding standards. The timing and amount of contributions to
both our U.S. and non-U.S. plans may be impacted by a number of factors, including the funded status
of the plans.
Long-Lived Assets (including Tangible and Finite-Lived Intangible Assets)To conduct our
global business operations and execute our business strategy, we acquire tangible and intangible
assets, including property, plant and equipment and finite-lived intangible assets. At December 31,
2013, the net carrying amount of these long-lived assets totaled approximately $7.1 billion. The
determination of useful lives (for depreciation/amortization purposes) and whether or not these assets
are impaired involves the use of accounting estimates and assumptions, changes in which could
materially impact our financial condition or operating performance if actual results differ from such
estimates and assumptions. We evaluate the recoverability of the carrying amount of our long-lived
assets whenever events or changes in circumstances indicate that the carrying amount of a long-lived
asset group may not be fully recoverable. The principal factors in considering when to perform an
impairment review are as follows:
Significant under-performance (i.e., declines in sales, earnings or cash flows) of a business or
product line in relation to expectations;
Annual operating plans or five-year strategic plans that indicate an unfavorable trend in
operating performance of a business or product line;
55
Significant negative industry or economic trends; or
Significant changes or planned changes in our use of the assets.
Once it is determined that an impairment review is necessary, recoverability of assets is measured
by comparing the carrying amount of the asset grouping to the estimated future undiscounted cash
flows. If the carrying amount exceeds the estimated future undiscounted cash flows, the asset grouping
is considered to be impaired. The impairment is then measured as the difference between the carrying
amount of the asset grouping and its fair value. We endeavor to utilize the best information available to
measure fair value, which is usually either market prices (if available), level 1 or level 2 of the fair value
hierarchy, or an estimate of the future discounted cash flow, level 3 of the fair value hierarchy. The key
estimates in our discounted cash flow analysis include expected industry growth rates, our
assumptions as to volume, selling prices and costs, and the discount rate selected. As described in
more detail in Note 16 Financial Instruments and Fair Value Measures of Notes to the Financial
Statements, we have recorded impairment charges related to long-lived assets of $72 million in 2013,
principally related to property, plant and equipment and $22 million and 2012, principally related to
property, plant and equipment and intangible assets.
Goodwill and Indefinite-Lived Intangible Assets Impairment TestingGoodwill represents
the excess of acquisition costs over the fair value of the net tangible assets and identifiable intangible
assets acquired in a business combination. Indefinite-lived intangible assets primarily consist of
trademarks acquired in business combinations. Goodwill and indefinite-lived assets are not amortized,
but are subject to impairment testing. Our goodwill and indefinite-lived intangible asset balances of
$13.0 billion and $725 million, respectively, as of December 31, 2013, are subject to impairment testing
annually as of March 31, or whenever events or changes in circumstances indicate that the carrying
amount may not be fully recoverable. This testing compares carrying values to fair values and, when
appropriate, the carrying value is reduced to fair value. In testing goodwill, the fair value of our
reporting units is estimated utilizing a discounted cash flow approach utilizing cash flow forecasts in our
five year strategic and annual operating plans adjusted for terminal value assumptions. This
impairment test involves the use of accounting estimates and assumptions, changes in which could
materially impact our financial condition or operating performance if actual results differ from such
estimates and assumptions. To address this uncertainty we perform sensitivity analysis on key
estimates and assumptions.
We completed our annual impairment test as of March 31, 2013 and determined that there was no
impairment to our goodwill and indefinite-lived intangible assets as of that date. However, significant
negative industry or economic trends, disruptions to our business, unexpected significant changes or
planned changes in use of the assets, divestitures and market capitalization declines may have a
negative effect on the fair values in the future.
Income TaxesDeferred tax assets and liabilities are determined based on the difference
between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect
for the year in which the differences are expected to reverse. Our provision for income taxes is based
on domestic and international statutory income tax rates in the jurisdictions in which we operate.
Significant judgment is required in determining income tax provisions as well as deferred tax asset and
liability balances, including the estimation of valuation allowances and the evaluation of tax positions.
As of December 31, 2013, we recorded a net deferred tax asset of $1,004 million that is
comprised of net deductible temporary differences, net operating loss carryforwards and tax credit
carryforwards that are available to reduce taxable income in future periods. We maintain a valuation
allowance of $614 million to offset a portion of this non-U.S. net deferred tax asset. The determination
of the amount of valuation allowance to be provided on recorded deferred tax assets involves
estimates regarding (1) the timing and amount of the reversal of taxable temporary differences, (2)
expected future taxable income, and (3) the impact of tax planning strategies. A valuation allowance is
established to offset any deferred tax assets if, based upon the available evidence it is more likely than
not that some or all of the deferred tax asset will not be realized. In assessing the need for a valuation
allowance, we consider all available positive and negative evidence, including past operating results,
projections of future taxable income and the feasibility of ongoing tax planning strategies. The
projections of future taxable income include a number of estimates and assumptions regarding our
56
volume, pricing and costs. Additionally, valuation allowances related to deferred tax assets can be
impacted by changes to tax laws.
Our net deferred tax asset of $1,004 million consists of $19 million related to U.S. operations and
$985 million related to non-U.S. operations. The U.S. net deferred tax asset of $19 million consists of
federal and state tax credit and net operating loss carryforwards reduced by net taxable temporary
differences. The non-U.S. net deferred tax asset of $985 million consists principally of net deductible
temporary differences, net operating loss, capital loss and tax credit carryforwards, (mainly in Canada,
France, Luxembourg, Netherlands and the United Kingdom). We maintain a valuation allowance of
$614 million against a portion of the non-US net deferred tax assets. The valuation allowance
maintained against these deferred tax assets reflects our historical experience and lower expectations
of taxable income over the applicable carryforward periods. As more fully described in Note 6 to the
financial statements, our valuation allowance increased by $16 million in 2013, increased by $7 million
in 2012 and decreased by $45 million in 2011. In the event we determine that we will not be able to
realize our net deferred tax assets in the future, we will reduce such amounts through a charge to
income in the period such determination is made. Conversely, if we determine that we will be able to
realize net deferred tax assets in excess of the carrying amounts, we will decrease the recorded
valuation allowance through a credit to income in the period that such determination is made.
Significant judgment is required in determining income tax provisions and in evaluating tax
positions. We establish additional reserves for income taxes when, despite the belief that tax positions
are fully supportable, there remain certain positions that do not meet the minimum recognition
threshold. The approach for evaluating certain and uncertain tax positions is defined by authoritative
guidance which determines when a tax position is more likely than not to be sustained upon
examination by the applicable taxing authority. In the normal course of business, the Company and its
subsidiaries are examined by various federal, state and foreign tax authorities. We regularly assess the
potential outcomes of these examinations and any future examinations for the current or prior years in
determining the adequacy of our provision for income taxes. We continually assess the likelihood and
amount of potential adjustments and adjust the income tax provision, the current tax liability and
deferred taxes in the period in which the facts that give rise to a change in estimate become known.
Sales Recognition on Long-Term ContractsIn 2013, we recognized approximately 16 percent
of our total net sales using the percentage-of-completion method for long-term contracts in our
Automation and Control Solutions, Aerospace and Performance Materials and Technologies segments.
These long-term contracts are measured on the cost-to-cost basis for engineering-type contracts and
the units-of-delivery basis for production-type contracts. Accounting for these contracts involves
management judgment in estimating total contract revenue and cost. Contract revenues are largely
determined by negotiated contract prices and quantities, modified by our assumptions regarding
contract options, change orders, incentive and award provisions associated with technical performance
and price adjustment clauses (such as inflation or index-based clauses). Contract costs are incurred
over a period of time, which can be several years, and the estimation of these costs requires
management judgment. Cost estimates are largely based on negotiated or estimated purchase
contract terms, historical performance trends and other economic projections. Significant factors that
influence these estimates include inflationary trends, technical and schedule risk, internal and
subcontractor performance trends, business volume assumptions, asset utilization, and anticipated
labor agreements. Revenue and cost estimates are regularly monitored and revised based on changes
in circumstances. Anticipated losses on long-term contracts are recognized when such losses become
evident. We maintain financial controls over the customer qualification, contract pricing and estimation
processes to reduce the risk of contract losses.
OTHER MATTERS
Litigation
See Note 22 to the financial statements for a discussion of environmental, asbestos and other
litigation matters.
57
Recent Accounting Pronouncements
See Note 1 to the financial statements for a discussion of recent accounting pronouncements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Information relating to market risk is included in Item 7. Managements Discussion and Analysis of
Financial Condition and Results of Operations under the caption Financial Instruments.
58
ITEM 8. Financial Statements and Supplementary Data
CONSOLIDATED STATEMENT OF OPERATIONS
2013 2012 2011
(Dollars in millions,
except per share amounts)
Product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $31,214 $29,812 $28,745
Service sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,841 7,853 7,784
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,055 37,665 36,529
Costs, expenses and other
Cost of products sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,317 22,929 23,220
Cost of services sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,047 5,362 5,336
28,364 28,291 28,556
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . 5,190 5,218 5,399
Other (income) expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (238) (70) (84)
Interest and other financial charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 351 376
33,643 33,790 34,247
Income from continuing operations before taxes . . . . . . . . . . . . . . . . . . . . 5,412 3,875 2,282
Tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,450 944 417
Income from continuing operations after taxes . . . . . . . . . . . . . . . . . . . . . . 3,962 2,931 1,865
Income from discontinued operations after taxes . . . . . . . . . . . . . . . . . . . . 209
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,962 2,931 2,074
Less: Net income attributable to the noncontrolling interest . . . . . . . . . . 38 5 7
Net income attributable to Honeywell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,924 $ 2,926 $ 2,067
Amounts attributable to Honeywell:
Income from continuing operations less net income attributable
to the noncontrolling interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,924 2,926 1,858
Income from discontinued operations. . . . . . . . . . . . . . . . . . . . . . . . . . . 209
Net income attributable to Honeywell. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,924 $ 2,926 $ 2,067
Earnings per share of common stockbasic:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.99 3.74 2.38
Income from discontinued operations. . . . . . . . . . . . . . . . . . . . . . . . . . . 0.27
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4.99 $ 3.74 $ 2.65
Earnings per share of common stockassuming dilution:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.92 3.69 2.35
Income from discontinued operations. . . . . . . . . . . . . . . . . . . . . . . . . . . 0.26
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4.92 $ 3.69 $ 2.61
Cash dividends per share of common stock . . . . . . . . . . . . . . . . . . . . . . . . $ 1.68 $ 1.53 $ 1.37
The Notes to Financial Statements are an integral part of this statement.
59
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2013 2012 2011
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,962 $2,931 $ 2,074
Other comprehensive income (loss), net of tax
Foreign exchange translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . (52) 282 (146)
Actuarial gains (losses). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,064 (839) (1,317)
Prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 9 10
Prior service cost (credit) recognized during year . . . . . . . . . . . . . . . . . . 5 6 (1)
Actuarial losses recognized during year . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 649 1,171
Transition obligation recognized during year . . . . . . . . . . . . . . . . . . . . . . . 2 2 2
Settlements and curtailments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (26) (2) (107)
Foreign exchange translation and other . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) (23) 33
Pensions and other postretirement benefit adjustments. . . . . . . . . . . . . . . . . 2,203 (198) (209)
Unrealized gains (losses) for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . 140 (6) 12
Less: reclassification adjustment for gains included in net income . . 127
Changes in fair value of available for sale investments. . . . . . . . . . . . . . . . . 13 (6) 12
Effective portion of cash flow hedges recognized in other
comprehensive income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30) 14 (48)
Less: reclassification adjustment for losses included in net income . (23) (13) (14)
Changes in fair value of effective cash flow hedges. . . . . . . . . . . . . . . . . . . . (7) 27 (34)
Other comprehensive income (loss), net of tax . . . . . . . . . . . . . . . . . . . . . . . . 2,157 105 (377)
Comprehensive income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,119 3,036 1,697
Less: Comprehensive income attributable to the noncontrolling
interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 5 3
Comprehensive income attributable to Honeywell . . . . . . . . . . . . . . . . . . . . . . $6,083 $3,031 $ 1,694
60
CONSOLIDATED BALANCE SHEET
2013 2012
December 31,
A S S E T S
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,422 $ 4,634
Accounts, notes and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,929 7,429
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,293 4,235
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 849 669
Investments and other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,671 631
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,164 17,598
Investments and long-term receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 393 623
Property, plant and equipmentnet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,278 5,001
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,046 12,425
Other intangible assetsnet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,514 2,449
Insurance recoveries for asbestos related liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595 663
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 368 1,889
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,077 1,205
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $45,435 $41,853
L I A B I L I T I E S
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,174 $ 4,736
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 76
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,299 400
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 632 625
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,979 7,208
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,181 13,045
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,801 6,395
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 804 628
Postretirement benefit obligations other than pensions. . . . . . . . . . . . . . . . . . . . . . . . . 1,019 1,365
Asbestos related liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,150 1,292
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,734 5,913
Redeemable noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 150
S H A R E O W N E R S E Q U I T Y
Capitalcommon stock issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 958 958
additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,682 4,358
Common stock held in treasury, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,374) (8,801)
Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 818 (1,339)
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,383 17,799
Total Honeywell shareowners equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,467 12,975
Noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 90
Total shareowners equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,579 13,065
Total liabilities, redeemable noncontrolling interest and shareowners
equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $45,435 $41,853
61
CONSOLIDATED STATEMENT OF CASH FLOWS
2013 2012 2011
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,962 $ 2,931 $ 2,074
Less: Net income attributable to the noncontrolling interest . . . . . . . . . . . . . . . . . 38 5 7
Net income attributable to Honeywell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,924 2,926 2,067
Adjustments to reconcile net income attributable to Honeywell to net cash
provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 989 926 957
Loss (Gain) on sale of non-strategic businesses and assets. . . . . . . . . . . . 20 (5) (362)
Gain on sale of available for sale investments . . . . . . . . . . . . . . . . . . . . . . . . . (195)
Repositioning and other charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663 443 743
Net payments for repositioning and other charges . . . . . . . . . . . . . . . . . . . . . (763) (503) (468)
Pension and other postretirement (income) expense . . . . . . . . . . . . . . . . . . . (19) 1,065 1,823
Pension and other postretirement benefit payments . . . . . . . . . . . . . . . . . . . . (298) (1,183) (1,883)
Stock compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170 170 168
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262 84 (331)
Excess tax benefits from share based payment arrangements. . . . . . . . . . (132) (56) (42)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308 108 289
Changes in assets and liabilities, net of the effects of acquisitions and
divestitures:
Accounts, notes and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . (365) (119) (316)
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 25 (310)
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (421) (78) 25
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352 (13) 527
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (201) (273) (54)
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . . . . . . . 4,335 3,517 2,833
Cash flows from investing activities:
Expenditures for property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . (947) (884) (798)
Proceeds from disposals of property, plant and equipment . . . . . . . . . . . . . . . . . 15 5 6
Increase in investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,220) (702) (380)
Decrease in investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,122 559 354
Cash paid for acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,133) (438) (973)
Proceeds from sales of businesses, net of fees paid . . . . . . . . . . . . . . . . . . . . . . . 3 21 1,156
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201 11 24
Net cash used for investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,959) (1,428) (611)
Cash flows from financing activities:
Net increase (decrease) in commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 899 (199) 300
Net increase (decrease) in short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . 31 22 (2)
Payment of debt assumed with acquisitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (33)
Proceeds from issuance of common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 447 342 304
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,063 102 1,390
Payments of long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (607) (1) (939)
Excess tax benefits from share based payment arrangements . . . . . . . . . . . . . . 132 56 42
Repurchases of common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,073) (317) (1,085)
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,353) (1,211) (1,091)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Net cash used for financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . (433) (1,206) (1,114)
Effect of foreign exchange rate changes on cash and cash equivalents . . . . . . . . . (155) 53 (60)
Net increase in cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,788 936 1,048
Cash and cash equivalents at beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,634 3,698 2,650
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,422 $ 4,634 $ 3,698
62
CONSOLIDATED STATEMENT OF SHAREOWNERS EQUITY
Shares $ Shares $ Shares $
2013 2012 2011
(in millions)
Common stock, par value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 957.6 958 957.6 958 957.6 958
Additional paid-in capital
Beginning balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,358 4,157 3,977
Issued for employee savings and option plans. . . . . . . . . . . . . . 155 22 14
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . 170 170 168
Other owner changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) 9 (2)
Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,682 4,358 4,157
Treasury stock
Beginning balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (174.8) (8,801) (182.9) (8,948) (174.6) (8,299)
Reacquired stock or repurchases of common stock . . . . . . . . . (13.5) (1,073) (5.0) (317) (20.3) (1,085)
Issued for employee savings and option plans. . . . . . . . . . . . . . 14.5 500 13.1 464 12.0 436
Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (173.8) (9,374) (174.8) (8,801) (182.9) (8,948)
Retained earnings
Beginning balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,799 16,083 15,097
Net income attributable to Honeywell . . . . . . . . . . . . . . . . . . . . . . . 3,924 2,926 2,067
Dividends on common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,329) (1,210) (1,081)
Redemption value adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11)
Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,383 17,799 16,083
Accumulated other comprehensive income (loss)
Beginning balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,339) (1,444) (1,067)
Foreign exchange translation adjustment . . . . . . . . . . . . . . . . . . . (52) 282 (146)
Pensions and other postretirement benefit adjustments. . . . . . 2,203 (198) (209)
Changes in fair value of available for sale investments. . . . . . 13 (6) 12
Changes in fair value of effective cash flow hedges . . . . . . . . (7) 27 (34)
Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 818 (1,339) (1,444)
Noncontrolling interest
Beginning balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 96 121
Acquisitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Interest sold (bought). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 (5)
Net income attributable to noncontrolling interest . . . . . . . . . . . 9 2 7
Foreign exchange translation adjustment . . . . . . . . . . . . . . . . . . . (2) (4)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16) (21) (23)
Contributions from noncontrolling interest holders . . . . . . . . . . . 28
Other owner changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 90 96
Total shareowners equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 783.8 17,579 782.8 13,065 774.7 10,902
63
Note 1. Summary of Significant Accounting Policies
Accounting PrinciplesThe financial statements and accompanying notes are prepared in
accordance with accounting principles generally accepted in the United States of America. The
following is a description of Honeywells significant accounting policies.
Principles of ConsolidationThe consolidated financial statements include the accounts of
Honeywell International Inc. and all of its subsidiaries and entities in which a controlling interest is
maintained. Our consolidation policy requires equity investments that we exercise significant influence
over but do not control the investee and are not the primary beneficiary of the investees activities to be
accounted for using the equity method. Investments through which we are not able to exercise
significant influence over the investee and which we do not have readily determinable fair values are
accounted for under the cost method. All intercompany transactions and balances are eliminated in
consolidation.
principles, CPG is presented as discontinued operations in all periods presented. See Note 2
Acquisitions and Divestitures for further details.
Noncontrolling interest is included within the equity section in the Consolidated Balance Sheet.
Redeemable noncontrolling interest is considered to be temporary equity and is therefore reported
outside of permanent equity on the Consolidated Balance Sheet at the greater of the initial carrying
amount adjusted for the noncontrolling interests share of net income (loss) or its redemption value. We
present net income attributable to Honeywell and the noncontrolling interest in the Consolidated
Statement of Operations. Furthermore, we disclose comprehensive income attributable to Honeywell
and the noncontrolling interest in the Consolidated Statement of Comprehensive Income.
Cash and Cash EquivalentsCash and cash equivalents include cash on hand and on deposit
and highly liquid, temporary cash investments with an original maturity of three months or less.
InventoriesInventories are valued at the lower of cost or market using the first-in, first-out or the
average cost method and the last-in, first-out (LIFO) method for certain qualifying domestic inventories.
InvestmentsInvestments in affiliates over which we have a significant influence, but not a
controlling interest, are accounted for using the equity method of accounting. Other investments are
carried at market value, if readily determinable, or at cost. All equity investments are periodically
reviewed to determine if declines in fair value below cost basis are other-than-temporary. Significant
and sustained decreases in quoted market prices or a series of historic and projected operating losses
by investees are strong indicators of other-than-temporary declines. If the decline in fair value is
determined to be other-than-temporary, an impairment loss is recorded and the investment is written
down to a new carrying value.
Property, Plant and EquipmentProperty, plant and equipment are recorded at cost, including
any asset retirement obligations, less accumulated depreciation. For financial reporting, the straight-
line method of depreciation is used over the estimated useful lives of 10 to 50 years for buildings and
improvements and 2 to 16 years for machinery and equipment. Recognition of the fair value of
obligations associated with the retirement of tangible long-lived assets is required when there is a legal
obligation to incur such costs. Upon initial recognition of a liability, the cost is capitalized as part of the
related long-lived asset and depreciated over the corresponding assets useful life. See Note 11
Property, Plant and EquipmentNet and Note 17 Other Liabilities for additional details.
Goodwill and Indefinite-Lived Intangible AssetsGoodwill represents the excess of acquisition
costs over the fair value of tangible net assets and identifiable intangible assets of businesses
acquired. Goodwill and certain other intangible assets deemed to have indefinite lives are not
amortized. Intangible assets determined to have finite lives are amortized over their useful lives.
Goodwill and indefinite-lived intangible assets are subject to impairment testing annually as of March
64
NOTES TO FINANCIAL STATEMENTS
31, or whenever events or changes in circumstances indicate that the carrying amount may not be fully
recoverable. This testing compares carrying values to fair values and, when appropriate, the carrying
value of these assets is reduced to fair value. We completed our annual goodwill impairment test as of
March 31, 2013 and determined that there was no impairment as of that date. See Note 12 for
additional details on goodwill balances.
Other Intangible Assets with Determinable LivesOther intangible assets with determinable
lives consist of customer lists, technology, patents and trademarks and other intangibles and are
amortized over their estimated useful lives, ranging from 2 to 24 years.
Long-Lived AssetsWe evaluate the recoverability of the carrying amount of long-lived assets
(including property, plant and equipment and intangible assets with determinable lives) whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be fully
recoverable. We evaluate events or changes in circumstances based on a number of factors including
operating results, business plans and forecasts, general and industry trends and, economic projections
and anticipated cash flows. An impairment is assessed when the undiscounted expected future cash
flows derived from an asset are less than its carrying amount. Impairment losses are measured as the
amount by which the carrying value of an asset exceeds its fair value and are recognized in earnings.
We also evaluate the estimated useful lives of all long-lived assets if circumstances warrant and revise
such estimates based on current events.
Sales RecognitionProduct and service sales are recognized when persuasive evidence of an
arrangement exists, product delivery has occurred or services have been rendered, pricing is fixed or
determinable, and collection is reasonably assured. Service sales, principally representing repair,
maintenance and engineering activities in our Aerospace and Automation and Control Solutions
segments, are recognized over the contractual period or as services are rendered. Sales under long-
term contracts in the Aerospace, Automation and Control Solutions and Performance Materials and
Technologies segments are recorded on a percentage-of-completion method measured on the cost-to-
cost basis for engineering-type contracts and the units-of-delivery basis for production-type contracts.
Provisions for anticipated losses on long-term contracts are recorded in full when such losses become
evident. Revenues from contracts with multiple element arrangements are recognized as each element
is earned based on the relative fair value of each element provided the delivered elements have value
to customers on a standalone basis. Amounts allocated to each element are based on its objectively
determined fair value, such as the sales price for the product or service when it is sold separately or
competitor prices for similar products or services.
Allowance for Doubtful AccountsWe maintain allowances for doubtful accounts for estimated
losses as a result of customers inability to make required payments. We estimate anticipated losses
from doubtful accounts based on days past due, as measured from the contractual due date, historical
collection history and incorporate changes in economic conditions that may not be reflected in historical
trends for example, customers in bankruptcy, liquidation or reorganization. Receivables are written-off
against the allowance for doubtful accounts when they are determined uncollectible. Such
determination includes analysis and consideration of the particular conditions of the account, including
time intervals since last collection, success of outside collection agencies activity, solvency of customer
and any bankruptcy proceedings.
Environmental ExpendituresEnvironmental expenditures that relate to current operations are
expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by
past operations, and that do not provide future benefits, are expensed as incurred. Liabilities are
recorded when environmental remedial efforts or damage claim payments are probable and the costs
can be reasonably estimated. Such liabilities are based on our best estimate of the undiscounted future
costs required to complete the remedial work. The recorded liabilities are adjusted periodically as
remediation efforts progress or as additional technical, regulatory or legal information becomes
available. Given the uncertainties regarding the status of laws, regulations, enforcement policies, the
65
NOTES TO FINANCIAL STATEMENTS(Continued)
impact of other potentially responsible parties, technology and information related to individual sites,
we do not believe it is possible to develop an estimate of the range of reasonably possible
environmental losses in excess of our recorded liabilities.
Asbestos Related Contingencies and Insurance RecoveriesHoneywell is a defendant in
personal injury actions related to products containing asbestos (refractory and friction products). We
recognize a liability for any asbestos related contingency that is probable of occurrence and reasonably
estimable. Regarding North American Refractories Company (NARCO) asbestos related claims, we
accrued for pending claims based on terms and conditions in agreements with NARCO, its former
parent company, and certain asbestos claimants, and an estimate of the unsettled claims pending as
of the time NARCO filed for bankruptcy protection. We also accrued for the estimated value of future
NARCO asbestos related claims expected to be asserted against the NARCO Trust through 2018 as
described in Note 22 Commitments and Contingencies. In light of the inherent uncertainties in making
long term projections and in connection with the initial operation of a 524(g) trust, as well as the stay of
all NARCO asbestos claims from January 2002 through the effective date of the NARCO Trust on April
30, 2013, we do not believe that we have a reasonable basis for estimating NARCO asbestos claims
beyond 2018. Regarding Bendix asbestos related claims, we accrued for the estimated value of
pending claims using average resolution values for the previous five years. We also accrued for the
estimated value of future anticipated claims related to Bendix for the next five years based on historic
claims filing experience and dismissal rates, disease classifications, and average resolution values in
the tort system for the previous five years. In light of the uncertainties inherent in making long-term
projections, as well as certain factors unique to friction product asbestos claims, we do not believe that
we have a reasonable basis for estimating asbestos claims beyond the next five years. We will
continue to update the resolution values used to estimate the cost of pending and future Bendix claims
during the fourth quarter each year. For additional information see Note 22. We continually assess the
likelihood of any adverse judgments or outcomes to our contingencies, as well as potential ranges of
probable losses and recognize a liability, if any, for these contingencies based on an analysis of each
individual issue with the assistance of outside legal counsel and, if applicable, other experts.
In connection with the recognition of liabilities for asbestos related matters, we record asbestos
related insurance recoveries that are deemed probable. In assessing the probability of insurance
recovery, we make judgments concerning insurance coverage that we believe are reasonable and
consistent with our historical dealings and our knowledge of any pertinent solvency issues surrounding
insurers.
Aerospace Sales IncentivesWe provide sales incentives to commercial aircraft manufacturers
and airlines in connection with their selection of our aircraft equipment, predominately wheel and
braking system hardware, avionics, and auxiliary power units, for installation on commercial aircraft.
These incentives consist of free or deeply discounted products, credits for future purchases of product
and upfront cash payments. These costs are recognized in the period incurred as cost of products sold
or as a reduction to sales, as appropriate. Generally, for aircraft manufacturers, incentives are
recorded when the products are delivered; for airlines, incentives are recorded when the associated
aircraft are delivered by the aircraft manufacturer to the airline.
Research and DevelopmentResearch and development costs for company-sponsored
research and development projects are expensed as incurred. Such costs are principally included in
Cost of Products Sold and were $1,804, $1,847 and $1,799 million in 2013, 2012 and 2011,
respectively.
Stock-Based Compensation PlansThe principal awards issued under our stock-based
compensation plans, which are described in Note 20 Stock-Based Compensation Plans, include
non-qualified stock options and restricted stock units (RSUs). The cost for such awards is measured at
the grant date based on the fair value of the award. The value of the portion of the award that is
ultimately expected to vest is recognized as expense over the requisite service periods (generally the
66
vesting period of the equity award) and is included in selling, general and administrative expense in our
Consolidated Statement of Operations. Forfeitures are estimated at the time of grant to recognize
expense for those awards that are expected to vest and are based on our historical forfeiture rates.
Pension BenefitsWe sponsor both funded and unfunded U.S. and non-U.S. defined benefit
pension plans covering the majority of our employees and retirees. We recognize net actuarial gains or
losses in excess of 10 percent of the greater of the fair value of plan assets or the plans projected
benefit obligation (the corridor) annually in the fourth quarter each year (MTM Adjustment), and, if
applicable, in any quarter in which an interim remeasurement is triggered. The remaining components
of pension expense, primarily service and interest costs and assumed return on plan assets, are
recorded on a quarterly basis (Pension ongoing (income) expense).
Foreign Currency TranslationAssets and liabilities of subsidiaries operating outside the United
States with a functional currency other than U.S. dollars are translated into U.S. dollars using year-end
exchange rates. Sales, costs and expenses are translated at the average exchange rates in effect
during the year. Foreign currency translation gains and losses are included as a component of
Accumulated Other Comprehensive Income (Loss). For subsidiaries operating in highly inflationary
environments, inventories and property, plant and equipment, including related expenses, are
remeasured at the exchange rate in effect on the date the assets were acquired, while monetary
assets and liabilities are remeasured at year-end exchange rates. Remeasurement adjustments for
these subsidiaries are included in earnings.
Derivative Financial InstrumentsAs a result of our global operating and financing activities, we
are exposed to market risks from changes in interest and foreign currency exchange rates and
commodity prices, which may adversely affect our operating results and financial position. We
minimize our risks from interest and foreign currency exchange rate and commodity price fluctuations
through our normal operating and financing activities and, when deemed appropriate through the use
of derivative financial instruments. Derivative financial instruments are used to manage risk and are not
used for trading or other speculative purposes and we do not use leveraged derivative financial
instruments. Derivative financial instruments that qualify for hedge accounting must be designated and
effective as a hedge of the identified risk exposure at the inception of the contract. Accordingly,
changes in fair value of the derivative contract must be highly correlated with changes in fair value of
the underlying hedged item at inception of the hedge and over the life of the hedge contract.
All derivatives are recorded on the balance sheet as assets or liabilities and measured at fair
value. For derivatives designated as hedges of the fair value of assets or liabilities, the changes in fair
values of both the derivatives and the hedged items are recorded in current earnings. For derivatives
designated as cash flow hedges, the effective portion of the changes in fair value of the derivatives are
recorded in Accumulated Other Comprehensive Income (Loss) and subsequently recognized in
earnings when the hedged items impact earnings. Cash flows of such derivative financial instruments
are classified consistent with the underlying hedged item.
Transfers of Financial InstrumentsSales, transfers and securitization of financial instruments
are accounted for under authoritative guidance for the transfers and servicing of financial assets and
extinguishments of liabilities.
We sell interests in designated pools of trade accounts receivables to third parties. The terms of
the trade accounts receivable program permit the repurchase of receivables from the third parties at
our discretion. As a result, these program receivables are not accounted for as a sale and remain on
the Consolidated Balance Sheet with a corresponding amount recorded as Short-term borrowings.
At times we also transfer trade and other receivables that qualify as a sale and are thus are
removed from the Consolidated Balance Sheet at the time they are sold. The value assigned to any
subordinated interests and undivided interests retained in receivables sold is based on the relative fair
67
values of the interests retained and sold. The carrying value of the retained interests approximates fair
value due to the short-term nature of the collection period for the receivables.
Income TaxesDeferred tax liabilities or assets reflect temporary differences between amounts
of assets and liabilities for financial and tax reporting. Such amounts are adjusted, as appropriate, to
reflect changes in tax rates expected to be in effect when the temporary differences reverse. A
valuation allowance is established to offset any deferred tax asset if, based upon the available
evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The
determination of the amount of a valuation allowance to be provided on recorded deferred tax assets
involves estimates regarding (1) the timing and amount of the reversal of taxable temporary
differences, (2) expected future taxable income, and (3) the impact of tax planning strategies. A
valuation allowance is established to offset any deferred tax assets if, based upon the available
evidence it is more likely than not that some or all of the deferred tax asset will not be realized. In
assessing the need for a valuation allowance, we consider all available positive and negative evidence,
including past operating results, projections of future taxable income and the feasibility of ongoing tax
planning strategies. The projections of future taxable income include a number of estimates and
assumptions regarding our volume, pricing and costs. Additionally, valuation allowances related to
deferred tax assets can be impacted by changes to tax laws.
Significant judgment is required in determining income tax provisions and in evaluating tax
positions. We establish additional reserves for income taxes when, despite the belief that tax positions
are fully supportable, there remain certain positions that do not meet the minimum recognition
threshold. The approach for evaluating certain and uncertain tax positions is defined by the
authoritative guidance which determines when a tax position is more likely than not to be sustained
upon examination by the applicable taxing authority. In the normal course of business, the Company
and its subsidiaries are examined by various federal, state and foreign tax authorities. We regularly
assess the potential outcomes of these examinations and any future examinations for the current or
prior years in determining the adequacy of our provision for income taxes. We continually assess the
likelihood and amount of potential adjustments and adjust the income tax provision, the current tax
liability and deferred taxes in the period in which the facts that give rise to a change in estimate
become known.
Earnings Per ShareBasic earnings per share is based on the weighted average number of
common shares outstanding. Diluted earnings per share is based on the weighted average number of
common shares outstanding and all dilutive potential common shares outstanding.
Use of EstimatesThe preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates and assumptions
that affect the reported amounts in the financial statements and related disclosures in the
accompanying notes. Actual results could differ from those estimates. Estimates and assumptions
are periodically reviewed and the effects of revisions are reflected in the consolidated financial
statements in the period they are determined to be necessary.
ReclassificationsCertain prior year amounts have been reclassified to conform to the current
year presentation.
Recent Accounting PronouncementsChanges to accounting principles generally accepted in
the United States of America (U.S. GAAP) are established by the Financial Accounting Standards
Board (FASB) in the form of accounting standards updates (ASUs) to the FASBs Accounting
Standards Codification.
The Company considers the applicability and impact of all ASUs. ASUs not listed below were
assessed and determined to be either not applicable or are expected to have minimal impact on our
consolidated financial position or results of operations.
68
In May 2011, the FASB issued amendments to clarify the application of existing fair value
measurements and expand existing disclosure requirements. These amendments, effective for the
interim and annual periods beginning on or after December 15, 2011 (early adoption was prohibited),
resulted in a common definition of fair value and common requirements for measurement of and
disclosure requirements between U.S. GAAP and International Financial Reporting Standards. The
implementation of the amended accounting guidance did not have a material impact on our
In June 2011, the FASB issued amendments to disclosure requirements for presentation of
comprehensive income. This guidance, effective retrospectively for the interim and annual periods
beginning on or after December 15, 2011 (early adoption was permitted), required presentation of total
comprehensive income, the components of net income, and the components of other comprehensive
income either in a single continuous statement of comprehensive income or in two separate but
consecutive statements. In December 2011, the FASB issued an amendment to defer the presentation
on the face of the financial statements the effects of reclassifications out of accumulated other
comprehensive income on the components of net income and other comprehensive income for annual
and interim financial statements. The implementation of the amended accounting guidance did not
have a material impact on our consolidated financial position or results of operations. In February
2013, the FASB issued amendments to disclosure requirements for presentation of comprehensive
income. The standard required presentation (either in a single note or parenthetically on the face of the
financial statements) of the effect of significant amounts reclassified from each component of
accumulated other comprehensive income based on its source and the income statement line items
affected by the reclassification. If a component was not required to be reclassified to net income in its
entirety, a cross reference to the related footnote for additional information would be required. The
amendments were effective prospectively for reporting periods beginning after December 15, 2012
(early adoption was permitted). Since these amendments to accounting guidance impacted
presentation and disclosure requirements only, their adoption did not have a material impact on our
In September 2011, the FASB issued amendments to the goodwill impairment guidance which
provided an option for companies to use a qualitative approach to test goodwill for impairment if certain
conditions were met. The amendments were effective for annual and interim goodwill impairment tests
performed for fiscal years beginning after December 15, 2011 (early adoption was permitted). The
implementation of the amended accounting guidance did not have a material impact on our
In July 2012, the FASB issued amendments to the indefinite-lived intangible asset impairment
guidance which provided an option for companies to use a qualitative approach to test indefinite-lived
intangible assets for impairment if certain conditions were met. The amendments were effective for
annual and interim indefinite-lived intangible asset impairment tests performed for fiscal years
beginning after September 15, 2012. The implementation of the amended accounting guidance did not
have a material impact on our consolidated financial position or results of operations.
In February 2013, the FASB issued amendments to guidance for obligations resulting from joint
and several liability arrangements. The amended guidance requires an entity to measure obligations
resulting from joint and several liability arrangements for which the sum of (1) the amount of the
obligation within the scope of this guidance is fixed at the reporting date, as the amount the reporting
entity agreed to pay on the basis of its arrangement among its co-obligors and (2) any additional
amount the reporting entity expects to pay on behalf of its co-obligors. The guidance also requires an
entity to disclose the nature and amount of the obligation as well as other information about those
obligations. The amendments should be applied retrospectively to all prior periods presented for
obligations within the scope of guidance that exist at the beginning of an entitys fiscal year of adoption.
The amendments are effective for fiscal years, and interim periods within those years, beginning after
69
December 15, 2013 (early adoption is permitted). The implementation of the amended accounting
guidance is not expected to have a material impact on our consolidated financial position or results of
operations.
In March 2013, the FASB issued amendments to address the accounting for the cumulative
translation adjustment when a parent either sells a part or all of its investment in a foreign entity or no
longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity
or a business within a foreign entity. The amendments are effective prospectively for fiscal years (and
interim reporting periods within those years) beginning after December 15, 2013 (early adoption is
permitted). The initial adoption has no impact on our consolidated financial position and results of
operations.
In July 2013, the FASB issued amendments to allow the Federal Funds Effective Swap Rate
(which is the Overnight Index Swap rate, or OIS rate, in the U.S.) to be designated as a benchmark
interest rate for hedge accounting purposes under the derivatives and hedging guidance. The
amendments also allowed for the use of different benchmark rates for similar hedges. The
amendments were effective prospectively for qualifying new or redesignated hedging relationships
entered into on or after July 17, 2013. The initial adoption had no impact on our consolidated financial
position and results of operation.
In July 2013, the FASB issued amendments to guidance on the financial statement presentation of
an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit
carryforward exists. The amendments require entities to present an unrecognized tax benefit netted
against certain deferred tax assets when specific requirements are met. However, the amendments
only affect gross versus net presentation and do not impact the calculation of the unrecognized tax
benefit. The amendments are effective for fiscal years, and interim periods within those years,
beginning after December 15, 2013 (early adoption is permitted). The implementation of the amended
accounting guidance is not expected to have a material impact on our consolidated financial position.
Note 2. Acquisitions and Divestitures
AcquisitionsWe acquired businesses for an aggregate cost (net of cash acquired) of $1,133
million, $438 million, and $973 million in 2013, 2012 and 2011, respectively. For all of our acquisitions
the acquired businesses were recorded at their estimated fair values at the dates of acquisition.
Significant acquisitions made in these years are discussed below.
On September 17, 2013, the Company acquired 100 percent of the issued and outstanding shares
of Intermec, a leading provider of mobile computing, RFID and bar code, label and receipt printers for
use in warehousing, supply chain, field service and manufacturing environments. Intermec was a U.S.
public company that operated globally and had reported 2012 revenues of $790 million.
The aggregate value, net of cash acquired, was $607 million and was allocated to tangible and
identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at
the acquisition date. On a preliminary basis, the Company has assigned $257 million to identifiable
intangible assets, predominantly customer relationships, existing technology and trademarks. These
intangible assets are being amortized over their estimated lives which range from 4 to 15 years using
straight-line and accelerated amortization methods. The excess of the purchase price over the
estimated fair values of net assets acquired (approximating $349 million), was recorded as goodwill.
This goodwill arises primarily from the avoidance of the time and costs which would be required (and
the associated risks that would be encountered) to enhance our product offerings to key target markets
and enter into new and profitable segments, and the expected cost synergies that will be realized
through the consolidation of the acquired business within our Automation and Control Solutions
segment. The goodwill is non-deductible for tax purposes.
70
On June 3, 2013, the Company acquired RAE, a global manufacturer of fixed and portable gas
and radiation detection systems, and software. The aggregate value, net of cash acquired, was $338
million and was allocated to tangible and identifiable intangible assets acquired and liabilities assumed
based on their estimated fair values at the acquisition date. On a preliminary basis, the Company has
assigned approximately $102 million to identifiable intangible assets, predominantly customer
relationships, existing technology and trademarks. These intangible assets are being amortized over
their estimated lives which range from 3 to 15 years using straight-line and accelerated amortization
methods. The excess of the purchase price over the estimated fair values of net assets acquired
(approximating $264 million), was recorded as goodwill. This goodwill arises primarily from the
avoidance of the time and costs which would be required (and the associated risks that would be
encountered) to enhance our product offerings to key target markets and enter into new and profitable
segments, and the expected cost synergies that will be realized through the consolidation of the
acquired business within our Automation and Control Solutions segment. The goodwill is non-
deductible for tax purposes.
The results of Intermec and RAE from the acquisition dates through December 31, 2013 are
included in our Automation and Control Solutions segment. The results were not material to the
consolidated financial statements. As of December 31, 2013, the purchase accounting for Intermec
and RAE is subject to final adjustment primarily for the amounts allocated to intangible assets and
goodwill, useful lives of intangible assets, for certain pre-acquisition contingencies, and for the
valuation of inventory and property, plant and equipment.
On October 22, 2012, the Company acquired a 70 percent controlling interest in Thomas Russell
Co., a privately-held leading provider of technology and equipment for natural gas processing and
treating, for approximately $525 million ($368 million, net of cash acquired). Thomas Russell Co.s
results of operations have been consolidated into the Performance Materials and Technologies
segment, with the noncontrolling interest portion reflected in net income attributable to the
noncontrolling interest in the Consolidated Statement of Operations. During the calendar year 2016,
Honeywell has the right to acquire and the noncontrolling shareholder has the right to sell to Honeywell
the remaining 30 percent interest at a price based on a multiple of Thomas Russell Co.s average
annual operating income from 2013 to 2015, subject to a predetermined cap and floor. Additionally,
Honeywell has the right to acquire the remaining 30 percent interest for a fixed price equivalent to the
cap at any time on or before December 31, 2015. See Note 21 Redeemable Noncontrolling Interest.
The aggregate value of Thomas Russell Co. was allocated to tangible and identifiable intangible
assets acquired and liabilities assumed based on their consolidated estimated fair values at the
acquisition date. The Company has assigned approximately $205 million to identifiable intangible
assets. The intangible assets are predominantly backlog, technology, and trademarks. These
intangible assets are being amortized over their estimated lives, which range from 3 to 10 years,
using both straight-line and accelerated amortization methods. The excess of the purchase price over
the estimated fair values of net assets acquired (approximating $453 million), was recorded as
goodwill. This goodwill arises primarily from the avoidance of the time and costs which would be
required (and the associated risks that would be encountered) to enhance our product offerings to key
target markets and serve as entry into new and profitable businesses within the Performance Materials
and Technologies segment. Our interest in the acquired goodwill is deductible for tax purposes.
71
The following amounts represent the final determination of the fair value of the identifiable assets
acquired and liabilities assumed:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 157
Accounts and other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (221)
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18)
Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 453
Redeemable noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (151)
Purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 525
The results from the acquisition date through December 31, 2012 are included in the Performance
Materials and Technologies segment and were not material to the consolidated financial statements.
In December 2011, the Company acquired Kings Safetywear Limited (KSW) a leading
international provider of branded safety footwear. The aggregate value, net of cash acquired, was
approximately $331 million (including the assumption of debt of $33 million) and was allocated to
tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair
values at the acquisition date. The Company has assigned approximately $167 million to identifiable
intangible assets, predominantly trademarks, technology, and customer relationships. The definite lived
intangible assets are being amortized over their estimated lives, using straight-line and accelerated
amortization methods. The value assigned to trademarks of approximately $84 million is classified as
indefinite lived intangibles. The excess of the purchase price over the estimated fair values of net
assets acquired (approximately $157 million), was recorded as goodwill. This goodwill arises primarily
from the avoidance of the time and costs which would be required (and the associated risks that would
be encountered) to enhance our product offerings to key target markets and serve as entry into new
and profitable segments, and the expected cost synergies that will be realized through the
consolidation of the acquired business into our Automation and Control Solutions segment. Their
cost synergies are expected to be realized principally in the areas of selling, general and administrative
expenses, material sourcing and manufacturing. This goodwill is nondeductible for tax purposes.
The results from the acquisition date through December 31, 2011 are included in the Automation
and Control Solutions segment and were not material to the consolidated financial statements.
In August 2011, the Company acquired 100 percent of the issued and outstanding shares of EMS
Technologies, Inc. (EMS), a leading provider of connectivity solutions for mobile networking, rugged
mobile computers and satellite communications. EMS had reported 2010 revenues of approximately
$355 million.
The aggregate value, net of cash acquired, was approximately $513 million and was allocated to
tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair
values at the acquisition date. The Company has assigned approximately $119 million to identifiable
intangible assets, of which approximately $89 million and approximately $30 million were recorded
within the Aerospace and Automation and Control segments, respectively. The intangible assets are
predominantly customer relationships, existing technology and trademarks. These intangible assets are
being amortized over their estimated lives, using straight-line and accelerated amortization methods.
The excess of the purchase price over the estimated fair values of net assets acquired (approximating
$314 million), was recorded as goodwill. This goodwill arises primarily from the avoidance of the time
and costs which would be required (and the associated risks that would be encountered) to enhance
our product offerings to key target markets and serve as entry into new and profitable segments, and
the expected cost synergies that will be realized through the consolidation of the acquired business
72
into our Aerospace and Automation and Control Solutions segments. These cost synergies are
expected to be realized principally in the areas of selling, general and administrative expenses,
material sourcing and manufacturing. This goodwill is non-deductible for tax purposes.
The results from the acquisition date through December 31, 2011 are included in the Aerospace
and Automation and Control Solutions segments and were not material to the consolidated financial
statements.
In connection with all acquisitions in 2013, 2012 and 2011, the amounts recorded for transaction
costs and the costs of integrating the acquired businesses into Honeywell were not material.
The proforma results for 2013, 2012 and 2011, assuming these acquisitions had been made at the
beginning of the comparable prior year, would not be materially different from consolidated reported
results.
DivestituresIn January 2014, the Company entered into a definitive agreement to sell its
Friction Materials business to Federal Mogul Corporation for approximately $155 million. The
transaction, subject to required regulatory approvals and applicable information and consultation
requirements, is expected to close in the second half of 2014. The Company recognized a pre-tax and
after-tax loss of approximately $28 million in the fourth quarter of 2013. The sale of Friction Materials,
which has been part of the Transportation Systems segment, is consistent with the Companys
strategic focus on its portfolio of differentiated global technologies.
In July 2011, the Company sold its Consumer Products Group business (CPG) to Rank Group
Limited. The sale was completed for approximately $955 million in cash proceeds, resulting in a pre-tax
gain of approximately $301 million and approximately $178 million, net of tax. The gain was recorded
in net income from discontinued operations after taxes in the Companys Consolidated Statement of
Operations for the year ended December 31, 2011. The net income attributable to the noncontrolling
interest for the discontinued operations is insignificant. The sale of CPG, which had been part of the
Transportation Systems segment, is consistent with the Companys strategic focus on its portfolio of
differentiated global technologies.
The key components of income from discontinued operations related to CPG were as of follows:
2011
Year Ended
December 31,
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $530
Costs, expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421
Selling, general and administrative expense . . . . . . . . . . . . . . . . . . . . . . . . 63
Other (income) expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2)
Income before taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Gain on disposal of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . 301
Net income from discontinued operations before taxes . . . . . . . . . . . . . . 349
Tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
Net income from discontinued operations after taxes . . . . . . . $209
73
Note 3. Repositioning and Other Charges
A summary of repositioning and other charges follows:
2013 2012 2011
Severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $186 $ 91 $246
Asset impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 12 86
Exit costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 16 48
Reserve adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30) (66) (26)
Total net repositioning charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201 53 354
Asbestos related litigation charges, net of insurance . . . . . . . . . . . . . . . . . . . . 181 156 149
Probable and reasonably estimable environmental liabilities . . . . . . . . . . . . . 272 234 240
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Total net repositioning and other charges . . . . . . . . . . . . . . . . . . . . . . . . . . $663 $443 $743
The following table summarizes the pretax distribution of total net repositioning and other charges
by income statement classification:
2013 2012 2011
Cost of products and services sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $566 $428 $646
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 15 97
$663 $443 $743
The following table summarizes the pretax impact of total net repositioning and other charges by
segment:
2013 2012 2011
Aerospace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45 $ (5) $ 29
Automation and Control Solutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 18 191
Performance Materials and Technologies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 12 41
Transportation Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190 197 228
Corporate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304 221 254
$663 $443 $743
In 2013, we recognized repositioning charges totaling $231 million including severance costs of
$186 million related to workforce reductions of 3,081 manufacturing and administrative positions across
all of our segments. The workforce reductions were primarily related to cost savings actions taken in
connection with our productivity and ongoing functional transformation initiatives, achieving acquisition-
related synergies in our Automation and Control Solutions segment, outsourcing of non-core
components in our Aerospace and Transportation Systems segments, the shutdown of a
manufacturing facility in our Performance Materials and Technologies segment, and factory transitions
in our Automation and Control Solutions segment to more cost-effective locations. The repositioning
charges include asset impairments of $23 million primarily related to manufacturing plant and
equipment associated with the shutdown of a manufacturing facility in our Performance Materials and
Technologies segment. The repositioning charges also includes exit costs of $22 million primarily
related to closure obligations associated with the shutdown of manufacturing facilities and costs for
early termination of lease contracts. Also, $30 million of previously established accruals, primarily for
severance, in our Automation and Control Solutions and Performance Materials and Technologies
segments were returned to income in 2013 due to changes in the scope of previously announced
74
repositioning actions, lower than expected costs in completing the exit of a product line and fewer
employee severance actions caused by higher attrition than originally planned associated with prior
severance programs.
all of our segments. The workforce reductions were primarily related to the planned shutdown of a
manufacturing facility in our Transportation Systems segment, the exit from a product line in our
Performance Materials and Technologies segment, and cost savings actions taken in connection with
our productivity and ongoing functional transformation initiatives. The repositioning charge also
included asset impairments of $12 million principally related to manufacturing plant and equipment
associated with the exit of a product line in our Performance Materials and Technologies segment. The
repositioning charge also included exit costs of $16 million principally related to closure obligations
associated with the planned shutdown of a manufacturing facility in our Transportation Systems
segment and exit from a product line in our Performance Materials and Technologies segment. Also,
$66 million of previously established accruals, primarily for severance, in our Automation and Control
Solutions, Aerospace and Performance Materials and Technologies segments were returned to income
in 2012 due primarily to fewer employee severance actions caused by higher attrition than originally
planned associated with prior severance programs and changes in the scope of previously announced
repositioning actions.
all of our segments. The workforce reductions were primarily related to the planned shutdown of a
manufacturing facility in our Transportation Systems segment, cost savings actions taken in connection
with our productivity and ongoing functional transformation initiatives, factory transitions in connection
with acquisition-related synergies in our Automation and Control Solutions and Aerospace segments,
the exit from and/or rationalization of certain product lines and markets in our Performance Materials
and Technologies and Automation and Control Solutions segments, the consolidation of repair facilities
in our Aerospace segment, and factory consolidations and/or rationalizations and organizational
realignments of businesses in our Automation and Control Solutions segment. The repositioning
charges included asset impairments of $86 million principally related to the write-off of certain
intangible assets in our Automation and Control Solutions segment due to a change in branding
strategy and manufacturing plant and equipment associated with the planned shutdown of a
manufacturing facility and the exit of a product line and a factory transition as discussed above. The
repositioning charges also included exit costs of $48 million principally for costs to terminate contracts
related to the exit of a market and product line and a factory transition as discussed above. Exit costs
also included closure obligations associated with the planned shutdown of a manufacturing facility and
exit of a product line also as discussed above. Also, $26 million of previously established accruals,
primarily for severance, in our Aerospace and Automation and Control Solutions segments, were
returned to income in 2011 due principally to fewer employee separations than originally planned
associated with prior severance programs.
75
The following table summarizes the status of our total repositioning reserves:
Severance
Costs
Asset
Impairments
Exit
Costs Total
Balance at December 31, 2010 . . . . . . . . . . . . . . . . . . . $ 270 $ $ 34 $ 304
2011 charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246 86 48 380
2011 usagecash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (136) (23) (159)
2011 usagenoncash . . . . . . . . . . . . . . . . . . . . . . . . . . (86) (86)
Adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (26) (26)
Foreign currency translation. . . . . . . . . . . . . . . . . . . . . (1) (1)
Balance at December 31, 2011 . . . . . . . . . . . . . . . . . . . 353 59 412
2012 charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 12 16 119
2012 usagecash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (113) (23) (136)
2012 usagenoncash . . . . . . . . . . . . . . . . . . . . . . . . . . (12) (12)
Adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (61) (5) (66)
Foreign currency translation. . . . . . . . . . . . . . . . . . . . . 6 6
Balance at December 31, 2012 . . . . . . . . . . . . . . . . . . . 276 47 323
2013 charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 23 22 231
2013 usagecash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (139) (21) (160)
2013 usagenoncash . . . . . . . . . . . . . . . . . . . . . . . . . . (23) (23)
Adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27) (3) (30)
Foreign currency translation. . . . . . . . . . . . . . . . . . . . . 6 6
Balance at December 31, 2013 . . . . . . . . . . . . . . . . . . . $ 302 $ $ 45 $ 347
Certain repositioning projects in our Aerospace, Automation and Control Solutions and
Transportation Systems segments included exit or disposal activities, the costs related to which will
be recognized in future periods when the actual liability is incurred. The nature of these exit or disposal
costs includes asset set-up and moving, product recertification and requalification, and employee
retention, training and travel. The following table summarizes by segment, expected, incurred and
remaining exit and disposal costs related to 2011 repositioning actions which we were not able to
recognize at the time the actions were initiated. The exit and disposal costs related to the repositioning
actions in 2013 and 2012 which we were not able to recognize at the time the actions were initiated
were not significant.
2011 Repositioning Actions Aerospace
Automation and
Control Solutions
Transportation
Systems Total
Expected exit and disposal costs . . . . . . . $15 $11 $ 7 $33
Costs incurred during:
Year ended December 31, 2011. . . . . . (1) (1)
Year ended December 31, 2012. . . . . . (2) (3) (1) (6)
Year ended December 31, 2013. . . . . . (2) (4) (2) (8)
Remaining exit and disposal costs at
December 31, 2013. . . . . . . . . . . . . . . . . . $10 $ 4 $ 4 $18
In 2013, 2012 and 2011, we recognized charges of $272, $234 and $240 million, respectively, for
environmental liabilities deemed probable and reasonably estimable during the year. In 2013 this
included a charge of $58 million in the fourth quarter related to Onondaga Lake in Syracuse, New York
mainly reflecting updated estimates for completion of the dredging and capping components of the
approved Lake remedy. In 2013, 2012 and 2011, we recognized asbestos related litigation charges, net
of insurance, of $181, $156 and $149 million, respectively. Environmental and Asbestos matters are
76
discussed in detail in Note 22 Commitments and Contingencies of Notes to the Financial Statements.
In 2013 we also recognized other charges of $9 million related to the resolution of legal matters.
Note 4. Other (income) expense
2013 2012 2011
Equity (income) loss of affiliated companies . . . . . . . . . . . . . . . . . . . . $ (36) $(45) $(51)
Gain on sale of available for sale investments . . . . . . . . . . . . . . . . . (195)
Loss (gain) on sale of non-strategic businesses and assets. . . . . 20 (5) (61)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (69) (58) (58)
Foreign exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 36 50
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2 36
$(238) $(70) $(84)
Gain on sale of available for sale investments for 2013 is due to $195 million of realized gain
related to the sale of marketable equity securities. These securities (B/E Aerospace common stock),
designated as available for sale, were obtained in conjunction with the sale of the Consumables
Solutions business in July 2008. See Note 16, Financial Instruments and Fair Value Measures for
further details.
Loss on sale of non-strategic business and assets for 2013 includes a pre-tax loss of
approximately $28 million related to the pending divestiture of the Friction Materials business within
our Transportation Systems segment. See Note 2, Acquisitions and Divestitures for further details.
Gain on sale of non-strategic businesses and assets for 2011 includes a $50 million pre-tax gain,
$31 million net of tax, related to the divestiture of the automotive on-board sensor products business
within our Automation and Control Solutions segment.
Other, net in 2011 includes a loss of $29 million resulting from early redemption of debt in the first
quarter of 2011. See Note 14 Long-term Debt and Credit Agreements for further details.
Note 5. Interest and Other Financial Charges
2013 2012 2011
Years Ended December 31
Total interest and other financial charges . . . . . . . . . . . . . . . . . . . . . $346 $369 $389
Lesscapitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19) (18) (13)
$327 $351 $376
The weighted average interest rate on short-term borrowings and commercial paper outstanding at
December 31, 2013 and 2012 was 0.79 percent and 1.43 percent, respectively.
Note 6. Income Taxes
Income from continuing operations before taxes
2013 2012 2011
United States. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,002 $1,761 $ 318
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,410 2,114 1,964
$5,412 $3,875 $2,282
77
Tax expense (benefit)
2013 2012 2011
United States. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 993 $584 $ 3
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457 360 414
$1,450 $944 $417
2013 2012 2011
Tax expense consists of
Current:
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 663 $470 $ 171
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 10 13
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 428 380 564
$1,188 $860 $ 748
Deferred:
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 160 $ 85 $(185)
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 19 4
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 (20) (150)
262 84 (331)
$1,450 $944 $ 417
2013 2012 2011
The U.S. statutory federal income tax rate is reconciled to
our effective income tax rate as follows:
Statutory U.S. federal income tax rate . . . . . . . . . . . . . . . . . . 35.0% 35.0% 35.0%
Taxes on foreign earnings below U.S. tax rate(1). . . . . . . . (7.2) (7.1) (18.9)
State income taxes(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.8 0.8 0.4
Manufacturing incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.9) (1.7) (1.8)
ESOP dividend tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.5) (0.6) (1.1)
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.8) (0.4) (2.3)
Reserves for tax contingencies . . . . . . . . . . . . . . . . . . . . . . . . . 0.6 (0.4) 5.2
All other itemsnet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.2) (1.2) 1.8
26.8% 24.4% 18.3%
(1) Net of changes in valuation allowance
The effective tax rate increased by 2.4 percentage points in 2013 compared to 2012. The year over
year increase was primarily attributable to lower mark-to-market pension expense in the U.S. Other
factors causing an increase in the effective tax rate include higher tax expense related to an increase in
tax reserves and higher state tax expense. These increases in the effective tax rate were partially offset
by tax benefits from retroactive law changes in the U.S. The Companys foreign effective tax rate for
2013 was 19.0 percent, an increase of approximately 2.0 percentage points compared to 2012. The
year over year increase in the foreign effective tax rate was primarily attributable to higher expense
related to retroactive tax law changes in Germany and additional reserves in various jurisdictions,
coupled with higher earnings in higher tax rate jurisdictions. The effective tax rate was lower than the
U.S. statutory rate of 35 percent primarily due to overall foreign earnings taxed at lower rates.
78
The effective tax rate increased by 6.1 percentage points in 2012 compared to 2011 primarily due
to a change in the mix of earnings taxed at higher rates (primarily driven by an approximate 6.1
percentage point impact from the decrease in pension mark-to-market expense), a decreased benefit
from valuation allowances, a decreased benefit from the settlement of tax audits and the absence of
the U.S. R&D tax credit, partially offset by a decreased expense related to tax reserves. The foreign
effective tax rate was 17.0 percent, a decrease of approximately 4.1 percentage points which primarily
consisted of a 10.0 percent impact related to a decrease in tax reserves, partially offset by a 5.2
percent impact from increased valuation allowances on net operating losses primarily due to a
decrease in Luxembourg and French earnings available to be offset by net operating loss carry
forwards and a 1.4 percent impact from tax expense related to foreign exchange. The effective tax rate
was lower than the U.S. statutory rate of 35 percent primarily due to overall foreign earnings taxed at
lower rates.
Deferred tax assets (liabilities)
Deferred income taxes represent the future tax effects of transactions which are reported in
different periods for tax and financial reporting purposes. The tax effects of temporary differences and
tax carryforwards which give rise to future income tax benefits and payables are as follows:
Deferred tax assets:
2013 2012
December 31,
Pension. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32 $ 1,362
Postretirement benefits other than pensions . . . . . . . . . . . . . . . . . . . . . . 499 657
Asbestos and environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 437 535
Employee compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382 402
Other accruals and reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702 504
Net operating and capital losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 838 820
Tax credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266 333
Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,156 4,613
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (614) (598)
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,542 $ 4,015
Deferred tax liabilities:
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (654) $ (668)
Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,126) (1,106)
Other asset basis differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (350) (327)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22) (39)
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,152) (2,140)
Net deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 390 $ 1,875
The net deferred tax assets are included as components of Current and Non-Current Deferred
Income Taxes and Accrued Liabilities within the Consolidated Balance Sheet.
There were approximately $45 million of U.S. federal tax net operating losses available for
carryforward at December 31, 2013 with various expiration dates though 2032. All of these
carryforwards were generated by subsidiaries prior to their acquisition. The use of pre-acquisition
net operating loss carryforwards are subject to limitations imposed by Section 382 of the Internal
Revenue Code. We do not anticipate that these limitations will affect the utilization of these
carryforwards prior to their expiration. The Company has state tax net operating loss carryforwards of
$2.7 billion at December 31, 2013 with various expiration dates through 2034. We also have foreign
net operating and capital losses of $3.0 billion which are available to reduce future income tax
payments in several countries, subject to varying expiration rules.
79
There were approximately $62 million of U.S. federal tax credits available for carryforward at
December 31, 2013 with various expiration dates through 2032. All of these carryforwards were
generated by subsidiaries prior to their acquisition. The use of pre-acquisition tax credit carryforwards
are subject to limitations imposed by Section 382 of the Internal Revenue Code. We do not anticipate
that these limitations will affect the utilization of these carryforwards prior to their expiration. We also
have state tax credit carryforwards of $46 million at December 31, 2013, including carryforwards of $40
million with various expiration dates through 2028 and tax credits of $6 million which are not subject to
expiration. There were approximately $173 million of tax credits available for carryforward in foreign
jurisdictions, primarily in Canada, at December 31, 2013 with various expiration dates through 2032.
The valuation allowance against deferred tax assets increased by $16 million in 2013 and
increased by $7 million and decreased by $45 million in 2012 and 2011, respectively. The 2013
increase in the valuation allowance was primarily due to decreased earnings in France and
Luxembourg. This is partially offset by a decrease in the valuation allowance in Germany and the
United Kingdom. The 2012 increase in the valuation allowance was primarily due to decreased
earnings in France and Luxembourg. This is partially offset by a decrease in the valuation allowance
related to purchase accounting for various acquisitions and audit resolutions for various countries. The
2011 decrease in the valuation allowance was primarily due to decreased foreign net operating losses
related to the Netherlands and Germany, partially offset by the increase in the valuation allowance of
France, Luxembourg and Canada.
Federal income taxes have not been provided on undistributed earnings of the majority of our
international subsidiaries as it is our intention to reinvest these earnings into the respective
subsidiaries. At December 31, 2013 Honeywell has not provided for U.S. federal income and foreign
withholding taxes on approximately $13.5 billion of such earnings of our non-U.S. operations. It is not
practicable to estimate the amount of tax that might be payable if some or all of such earnings were to
be repatriated, and the amount of foreign tax credits that would be available to reduce or eliminate the
resulting U.S. income tax liability.
We had $729 million, $722 million and $815 million of unrecognized tax benefits as of December
31, 2013, 2012, and 2011 respectively. If recognized, $729 million would be recorded as a component
of income tax expense as of December 31, 2013. For the year ended December 31, 2013, the
Company increased its unrecognized tax benefits by $7 million due to adjustments related to our
ongoing assessment of the likelihood and amount of potential outcomes of current and future
examinations, partially offset by the expiration of various statute of limitations and resolutions of audits
with tax authorities. For the year ended December 31, 2012, the Company decreased its unrecognized
tax benefits by $93 million due to the expiration of various statute of limitations and resolutions of
audits with tax authorities, partially offset by adjustments related to our ongoing assessment of the
likelihood and amount of potential outcomes of current and future examinations. The following table
summarizes the activity related to our unrecognized tax benefits:
2013 2012 2011
Change in unrecognized tax benefits:
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $722 $815 $ 757
Gross increases related to current period tax positions . . . . . . . . . . . 41 25 46
Gross increases related to prior periods tax positions. . . . . . . . . . . . . 118 44 327
Gross decreases related to prior periods tax positions . . . . . . . . . . . . (21) (62) (56)
Decrease related to resolutions of audits with tax authorities . . . . . . (92) (40) (237)
Expiration of the statute of limitations for the assessment of taxes (30) (64) (12)
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9) 4 (10)
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $729 $722 $ 815
80
Generally, our uncertain tax positions are related to tax years that remain subject to examination
by the relevant tax authorities. The following table summarizes these open tax years by major
jurisdiction as of December 31, 2013:
Jurisdiction
Examination in
progress
Examination not yet
initiated
Open Tax Year
United States(1) . . . . . . . . . . . . . . . . . . . . . . 2001 2012 2007 2013
United Kingdom . . . . . . . . . . . . . . . . . . . . . . N/A 2011 2013
Canada(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2007 2012 2013
Germany(1) . . . . . . . . . . . . . . . . . . . . . . . . . . 2004 2011 2010 2013
France. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2000 2003, 2008 2013 2004 2007
Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . 2009 2010 2013
Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A 2009 2013
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2003 2012 2013
India. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2000 2011 2012 2013
Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2008 2012 2013
(1) Includes federal as well as state, provincial or similar local jurisdictions, as applicable.
Based on the outcome of these examinations, or as a result of the expiration of statute of
limitations for specific jurisdictions, it is reasonably possible that certain unrecognized tax benefits for
tax positions taken on previously filed tax returns will materially change from those recorded as
liabilities for uncertain tax positions in our financial statements. In addition, the outcome of these
examinations may impact the valuation of certain deferred tax assets (such as net operating losses) in
future periods. Based on the number of tax years currently under audit by the relevant U.S federal,
state and foreign tax authorities, the Company anticipates that several of these audits may be finalized
in the foreseeable future. However, based on the status of these examinations, the protocol of
finalizing audits by the relevant taxing authorities, and the possibility that the Company might challenge
certain audit findings (which could include formal legal proceedings), at this time it is not possible to
estimate the impact of such changes, if any, to previously recorded uncertain tax positions.
Unrecognized tax benefits for examinations in progress were $431 million, $443 million and $482
million, as of December 31, 2013, 2012, and 2011, respectively. The decrease from 2012 to 2013 is
primarily due to the expiration of various statute of limitations and resolutions of audits with tax
authorities. The decrease from 2011 to 2012 is primarily due to the expiration of various statute of
limitations and resolutions of audits with tax authorities. Estimated interest and penalties related to the
underpayment of income taxes are classified as a component of Tax Expense in the Consolidated
Statement of Operations and totaled $17 million, $37 million and $63 million for the years ended
December 31, 2013, 2012, and 2011, respectively. Accrued interest and penalties were $301 million,
$284 million and $247 million, as of December 31, 2013, 2012, and 2011, respectively.
81
Note 7. Earnings Per Share
The details of the earnings per share calculations for the years ended December 31, 2013, 2012
and 2011 are as follows:
Basic 2013 2012 2011
Income from continuing operations less net income attributable to the
noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,924 $2,926 $1,858
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209
Net income attributable to Honeywell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,924 $2,926 $2,067
Weighted average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 786.4 782.4 780.8
Earnings per share of common stock:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4.99 $ 3.74 $ 2.38
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.27
Net Income attributable to Honeywell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4.99 $ 3.74 $ 2.65
Assuming Dilution 2013 2012 2011
Income from continuing operations less net income attributable to the
noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,924 $2,926 $1,858
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209
Net income attributable to Honeywell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,924 $2,926 $2,067
Average Shares
Weighted average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 786.4 782.4 780.8
Dilutive securities issuablestock plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.9 9.5 10.8
Total weighted average diluted shares outstanding . . . . . . . . . . . . . . . . . . . . . 797.3 791.9 791.6
Earnings per share of common stockassuming dilution:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4.92 $ 3.69 $ 2.35
Income from discontinuing operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.26
Net income attributable to Honeywell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4.92 $ 3.69 $ 2.61
The diluted earnings per share calculations exclude the effect of stock options when the options
assumed proceeds exceed the average market price of the common shares during the period. In 2013,
2012, and 2011 the weighted number of stock options excluded from the computations were 2.2
million, 12.5 million, and 9.5 million, respectively. These stock options were outstanding at the end of
each of the respective periods.
Note 8. Accounts, Notes and Other Receivables
2013 2012
December 31,
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,530 $6,940
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 646 737
8,176 7,677
LessAllowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (247) (248)
$7,929 $7,429
82
Trade Receivables includes $1,609 and $1,495 million of unbilled balances under long-term
contracts as of December 31, 2013 and December 31, 2012, respectively. These amounts are billed in
accordance with the terms of customer contracts to which they relate.
Note 9. Inventories
2013 2012
December 31,
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,121 $1,152
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 841 859
Finished products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,497 2,421
4,459 4,432
Reduction to LIFO cost basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (166) (197)
$4,293 $4,235
Inventories valued at LIFO amounted to $405 and $325 million at December 31, 2013 and 2012,
respectively. Had such LIFO inventories been valued at current costs, their carrying values would have
been approximately $166 and $197 million higher at December 31, 2013 and 2012, respectively.
Note 10. Investments and Long-Term Receivables
2013 2012
December 31,
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $143 $424
Long-term trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235 168
Long-term financing receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 31
$393 $623
The decline in the investments balance as of December 31, 2013 compared to December 31,
2012 is primarily due to the reclassification of available for sale securities (B/E Aerospace common
stock) to Investments and Other Current Assets on the Consolidated Balance Sheet.
Long-Term Trade and Other Receivables include $26 million and $31 million of unbilled balances
under long-term contracts as of December 31, 2013 and 2012, respectively. These amounts are billed
in accordance with the terms of the customer contracts to which they relate.
The following table summarizes long term trade, financing and other receivables by segment,
including current portions of these receivables and the related allowances for credit losses.
December 31,
2013
Aerospace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14
Automation and Control Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Performance Materials and Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Transportation Systems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
$255
Allowance for credit losses for the above detailed long-term trade, financing and other receivables
totaled $5 million and $4 million as of December 31, 2013 and 2012, respectively. The receivables are
evaluated for recoverability on an individual basis, including consideration of credit quality. The above
detailed financing receivables are predominately with commercial and governmental counterparties of
investment grade credit quality.
83
Note 11. Property, Plant and EquipmentNet
2013 2012
December 31,
Land and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 376 $ 367
Machinery and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,437 10,023
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,157 3,045
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 647 592
14,617 14,027
LessAccumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,339) (9,026)
$ 5,278 $ 5,001
Depreciation expense was $670, $660 and $699 million in 2013, 2012 and 2011, respectively.
Note 12. Goodwill and Other Intangible AssetsNet
The change in the carrying amount of goodwill for the years ended December 31, 2013 and 2012
by segment is as follows:
December 31,
2012 Acquisitions
Currency
Translation
Adjustment
December 31,
2013
Aerospace. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,075 $ $ 1 $ 2,076
Automation and Control Solutions . . . . . . . . . . . . 8,343 606 8,949
Performance Materials and Technologies . . . . . 1,810 12 2 1,824
Transportation Systems . . . . . . . . . . . . . . . . . . . . . . 197 197
$12,425 $618 $ 3 $13,046
We completed our annual impairment testing of goodwill and indefinite-lived intangibles as of
March 31, 2013 and determined that there was no impairment as of that date. No matters have arisen
subsequent to that date which have resulted in a change to this assessment.
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
December 31, 2013 December 31, 2012
Determinable life intangibles:
Patents and technology . . . . . $1,438 $ (935) $ 503 $1,224 $ (841) $ 383
Customer relationships . . . . . . 1,904 (749) 1,155 1,736 (625) 1,111
Trademarks. . . . . . . . . . . . . . . . . 194 (118) 76 179 (103) 76
Other . . . . . . . . . . . . . . . . . . . . . . . 294 (234) 60 311 (157) 154
3,830 (2,036) 1,794 3,450 (1,726) 1,724
Indefinite life intangibles:
Trademarks. . . . . . . . . . . . . . . . . 720 720 725 725
$4,550 $(2,036) $2,514 $4,175 $(1,726) $2,449
Intangible assets amortization expense was $319 million, $266 million, and $249 million in 2013,
2012, 2011, respectively. Estimated intangible asset amortization expense for each of the next five
years approximates $261 million in 2014, $217 million in 2015, $193 million in 2016, $183 million in
2017, and $168 million in 2018.
84
Note 13. Accrued Liabilities
2013 2012
December 31,
Compensation, benefit and other employee related . . . . . . . . . . . . . . . . . . . $1,506 $1,447
Customer advances and deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,172 2,127
Asbestos related liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 461 480
Repositioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303 323
Product warranties and performance guarantees. . . . . . . . . . . . . . . . . . . . . . 323 375
Environmental costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304 304
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240 548
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 108
Other taxes (payroll, sales, VAT etc.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249 232
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255 192
Other (primarily operating expenses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,066 1,072
$6,979 $7,208
85
Note 14. Long-term Debt and Credit Agreements
2013 2012
December 31,
4.25% notes due 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 600
3.875% notes due 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600 600
Floating rate notes due 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700
5.40% notes due 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400 400
5.30% notes due 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400 400
5.30% notes due 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 900 900
5.00% notes due 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 900 900
4.25% notes due 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800 800
3.35% notes due 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300
5.70% notes due 2036 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 550 550
5.70% notes due 2037 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600 600
5.375% notes due 2041 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600 600
Industrial development bond obligations, floating rate maturing at
various dates through 2037 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 37
6.625% debentures due 2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216 216
9.065% debentures due 2033 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 51
Other (including capitalized leases), 0.6%-13.3% maturing at various
dates through 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 381 366
7,433 7,020
Less: current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (632) (625)
$6,801 $6,395
The schedule of principal payments on long-term debt is as follows:
December 31,
2013
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 632
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 860
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 468
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 442
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 901
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,130
7,433
Less-current portion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (632)
$6,801
In March 2013, the Company repaid $600 million of its 4.25 percent notes.
In November 2013, the Company issued $300 million 3.35 percent Senior Notes due 2023 and
$700 million Floating Rate Senior Notes due 2015 (collectively, the Notes). The Notes are senior
unsecured and unsubordinated obligations of Honeywell and rank equally with all of Honeywells
existing and future senior unsecured debt and senior to all of Honeywells subordinated debt. The
offering resulted in gross proceeds of $1 billion, offset by $7 million in discount and closing costs
related to the offering.
On December 10, 2013, the Company entered into a $4 billion Amended and Restated Five Year
Credit Agreement (Credit Agreement) with a syndicate of banks. Commitments under the Credit
Agreement can be increased pursuant to the terms of the Credit Agreement to an aggregate amount
not to exceed $4.5 billion. The Credit Agreement contains a $700 million sublimit for the issuance of
86
NOTES TO FINANCIAL STATEMENTS
letters of credit. The Credit Agreement is maintained for general corporate purposes and amends and
restates the previous $3 billion five year credit agreement dated April 2, 2012 (Prior Agreement).
There have been no borrowings under the Credit Agreement or the Prior Agreement.
The Credit Agreement does not restrict our ability to pay dividends and contains no financial
covenants. The failure to comply with customary conditions or the occurrence of customary events of
default contained in the Credit Agreement would prevent any further borrowings and would generally
require the repayment of any outstanding borrowings under the Credit Agreement. Such events of
default include: (a) non-payment of Credit Agreement debt, interest or fees; (b) non-compliance with
the terms of the Credit Agreement covenants; (c) cross-default with other debt in certain
circumstances; (d) bankruptcy or insolvency; and (e) defaults upon obligations under the Employee
Retirement Income Security Act. Additionally, each of the banks has the right to terminate its
commitment to lend additional funds or issue letters of credit under the Credit Agreement if any person
or group acquires beneficial ownership of 30 percent or more of our voting stock, or, during any 12-
month period, individuals who were directors of Honeywell at the beginning of the period cease to
constitute a majority of the Board of Directors.
The Credit Agreement has substantially the same material terms and conditions as the Prior
Agreement with an improvement in pricing and an extension of maturity. Loans under the Credit
Agreement are required to be repaid no later than December 10, 2018, unless such date is extended
pursuant to the terms of the Credit Agreement.
Revolving credit borrowings under the Credit Agreement would bear interest, at Honeywells
option, (A) (1) at a rate equal to the highest of (a) the floating base rate publicly announced by
Citibank, N.A., (b) 0.5 percent above the Federal funds rate or (c) LIBOR plus 1.00 percent, plus (2) a
margin based on Honeywells credit default swap mid-rate spread and subject to a floor and a cap as
set forth in the Credit Agreement (the Applicable Margin) minus 1.00 percent, provided such margin
shall not be less than zero; or (B) at a rate equal to LIBOR plus the Applicable Margin; or (C) by a
competitive bidding procedure.
We have agreed to pay a commitment fee for the aggregate unused commitment for the Credit
Agreement, which is subject to change, based upon a grid determined by our long term debt ratings.
The Credit Agreement is not subject to termination based upon a decrease in our debt ratings or a
material adverse change as defined by the Credit Agreement.
As a source of liquidity, we sell interests in designated pools of trade accounts receivables to third
parties. As of December 31, 2013 and December 31, 2012, none of the receivables in the designated
pools had been sold to third parties. When we sell receivables, they are over-collateralized and we
retain a subordinated interest in the pool of receivables representing that over-collateralization as well
as an undivided interest in the balance of the receivables pools. The terms of the trade accounts
receivable program permit the repurchase of receivables from the third parties at our discretion,
providing us with an additional source of revolving credit. As a result, program receivables remain on
the Companys balance sheet with a corresponding amount recorded as Short-term borrowings.
87
Note 15. Lease Commitments
Future minimum lease payments under operating leases having initial or remaining noncancellable
lease terms in excess of one year are as follows:
At December 31,
2013
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 313
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264
$1,244
We have entered into agreements to lease land, equipment and buildings. Principally all our
operating leases have initial terms of up to 25 years, and some contain renewal options subject to
customary conditions. At any time during the terms of some of our leases, we may at our option
purchase the leased assets for amounts that approximate fair value. We do not expect that any of our
commitments under the lease agreements will have a material adverse effect on our consolidated
Rent expense was $404, $390 and $386 million in 2013, 2012 and 2011, respectively.
Note 16. Financial Instruments and Fair Value Measures
Credit and Market RiskFinancial instruments, including derivatives, expose us to counterparty
credit risk for nonperformance and to market risk related to changes in interest and currency exchange
rates and commodity prices. We manage our exposure to counterparty credit risk through specific
minimum credit standards, diversification of counterparties, and procedures to monitor concentrations
of credit risk. Our counterparties in derivative transactions are substantial investment and commercial
banks with significant experience using such derivative instruments. We monitor the impact of market
risk on the fair value and cash flows of our derivative and other financial instruments considering
reasonably possible changes in interest rates, currency exchange rates and commodity prices and
restrict the use of derivative financial instruments to hedging activities.
We continually monitor the creditworthiness of our customers to which we grant credit terms in the
normal course of business. The terms and conditions of our credit sales are designed to mitigate or
eliminate concentrations of credit risk with any single customer. Our sales are not materially dependent
on a single customer or a small group of customers.
Foreign Currency Risk ManagementWe conduct our business on a multinational basis in a
wide variety of foreign currencies. Our exposure to market risk for changes in foreign currency
exchange rates arises from international financing activities between subsidiaries, foreign currency
denominated monetary assets and liabilities and transactions arising from international trade. Our
objective is to preserve the economic value of non-functional currency denominated cash flows. We
attempt to hedge transaction exposures with natural offsets to the fullest extent possible and, once
these opportunities have been exhausted, through foreign currency exchange forward and option
contracts with third parties.
We hedge monetary assets and liabilities denominated in non-functional currencies. Prior to
conversion into U.S. dollars, these assets and liabilities are remeasured at spot exchange rates in
effect on the balance sheet date. The effects of changes in spot rates are recognized in earnings and
included in Other (Income) Expense. We partially hedge forecasted sales and purchases, which
predominantly occur in the next twelve months and are denominated in non-functional currencies, with
88
currency forward contracts. Changes in the forecasted non-functional currency cash flows due to
movements in exchange rates are substantially offset by changes in the fair value of the currency
forward contracts designated as hedges. Market value gains and losses on these contracts are
recognized in earnings when the hedged transaction is recognized. Open foreign currency exchange
forward contracts mature predominantly in the next twelve months. At December 31, 2013 and 2012,
we had contracts with notional amounts of $7,298 million and $8,506 million, respectively, to exchange
foreign currencies, principally the U.S. Dollar, Euro, Canadian Dollar, British Pound, Mexican Peso,
Indian Rupee, Chinese Renminbi, Czech Koruna, Hong Kong Dollar, Korean Won, Singapore Dollar,
Swiss Franc, United Arab Emirates Dirham, Swedish Krona, Thai Baht and Romanian Leu.
Commodity Price Risk ManagementOur exposure to market risk for commodity prices can
result in changes in our cost of production. We primarily mitigate our exposure to commodity price risk
through the use of long-term, fixed-price contracts with our suppliers and formula price agreements
with suppliers and customers. We also enter into forward commodity contracts with third parties
designated as hedges of anticipated purchases of several commodities. Forward commodity contracts
are marked-to-market, with the resulting gains and losses recognized in earnings when the hedged
transaction is recognized. At December 31, 2013 and 2012, we had contracts with notional amounts of
$1 million and $17 million, respectively, related to forward commodity agreements, principally base
metals and natural gas.
Interest Rate Risk ManagementWe use a combination of financial instruments, including long-
term, medium-term and short-term financing, variable-rate commercial paper, and interest rate swaps
to manage the interest rate mix of our total debt portfolio and related overall cost of borrowing. At
December 31, 2013 and 2012, interest rate swap agreements designated as fair value hedges
effectively changed $1,700 million and $1,400 million, respectively, of fixed rate debt at rates of 3.96
and 4.09, respectively, to LIBOR based floating rate debt. Our interest rate swaps mature at various
dates through 2023.
Fair Value of Financial InstrumentsThe FASBs accounting guidance defines fair value as the
price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date (exit price). The FASBs guidance classifies the
inputs used to measure fair value into the following hierarchy:
Level 1 Unadjusted quoted prices in active markets for identical assets
or liabilities
Level 2 Unadjusted quoted prices in active markets for similar assets
or liabilities, or
Unadjusted quoted prices for identical or similar assets or
liabilities in markets that are not active, or
Inputs other than quoted prices that are observable for the
asset or liability
Level 3 Unobservable inputs for the asset or liability
The Company endeavors to utilize the best available information in measuring fair value. Financial
and nonfinancial assets and liabilities are classified in their entirety based on the lowest level of input
that is significant to the fair value measurement. The following table sets forth the Companys financial
assets and liabilities that were accounted for at fair value on a recurring basis as of December 31,
2013 and 2012:
89
2013 2012
December 31,
Assets:
Foreign currency exchange contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20 $ 52
Available for sale investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 826 518
Interest rate swap agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 146
Forward commodity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Liabilities:
Foreign currency exchange contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27 $ 32
Interest rate swap agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Forward commodity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The foreign currency exchange contracts, interest rate swap agreements, and forward commodity
contracts are valued using broker quotations, or market transactions in either the listed or over-the-
counter markets. As such, these derivative instruments are classified within level 2. The Company
holds investments in marketable equity securities that are designated as available for sale and are
valued using quoted market prices. As such, these investments are classified within level 1. The
Company also holds investments in commercial paper, certificates of deposits, and time deposits that
are designated as available for sale and are valued using market transactions in over-the-counter
markets. As such, these investments are classified within level 2.
The carrying value of cash and cash equivalents, trade accounts and notes receivables, payables,
commercial paper and short-term borrowings contained in the Consolidated Balance Sheet
approximates fair value. The following table sets forth the Companys financial assets and liabilities
that were not carried at fair value:
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
December 31, 2013 December 31, 2012
Assets
Long-term receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 250 $ 245 $ 199 $ 200
Liabilities
Long-term debt and related current maturities. . . . . . . . . . . $7,433 $8,066 $7,020 $8,152
The Company determined the fair value of the long term receivables by discounting based upon
the terms of the receivable and counterparty details including credit quality. As such, the fair value of
these receivables is considered level 2. The Company determined the fair value of the long-term debt
and related current maturities utilizing transactions in the listed markets for identical or similar liabilities.
As such, the fair value of the long-term debt and related current maturities is considered level 2 as
well.
At December 31, 2013, the Company had nonfinancial assets, principally property, plant and
equipment, with a net book value of $244 million, which were accounted for at fair value on a
nonrecurring basis. These assets were tested for impairment and based on the fair value of these
assets the Company recognized losses of $72 million in the year ended December 31, 2013, primarily
in connection with our repositioning actions (see Note 3 Repositioning and Other Charges) and the
pending divestiture of the Friction Materials business within our Transportation Systems segment. At
December 31, 2012, the Company had nonfinancial assets, principally property, plant and equipment
and intangible assets, with a net book value of $22 million, which were accounted for at fair value on a
nonrecurring basis. These assets were tested for impairment and based on the fair value of these
assets the Company recognized losses of $22 million in the year ended December 31, 2012, primarily
in connection with our repositioning actions (see Note 3 Repositioning and Other Charges). The
Company has determined that the fair value measurements of these nonfinancial assets are level 3 in
the fair value hierarchy. The Company utilizes the market, income or cost approaches or a combination
90
of these valuation techniques for its non-recurring level 3 fair value measures. Inputs to such measures
include observable market data obtained from independent sources such as broker quotes and recent
market transactions for similar assets. It is the Companys policy to maximize the use of observable
inputs in the measurement of fair value or non-recurring level 3 measurements. To the extent
observable inputs are not available the Company utilizes unobservable inputs based upon the
assumptions market participants would use in valuing the asset. Examples of utilized unobservable
inputs are future cash flows, long term growth rates and applicable discount rates.
We enter into transactions that are subject to arrangements designed to provide for netting of
offsetting obligations in the event of the insolvency or default of a counterparty. However, we have not
elected to offset multiple contracts with a single counterparty, therefore the fair value of the derivative
instruments in a loss position is not offset against the fair value of derivative instruments in a gain
position. The derivatives utilized for risk management purposes as detailed above are included on the
Consolidated Balance Sheet and impacted the Statement of Operations as follows:
Fair value of derivatives classified as assets consist of the following:
Designated as a Hedge Balance Sheet Classification 2013 2012
December 31,
Foreign currency exchange contracts. . . . . . . . . Accounts, notes, and other receivables . . . . . . . $16 $ 37
Interest rate swap agreements . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 146
Forward commodity contracts . . . . . . . . . . . . . . . . Accounts, notes, and other receivables . . . . . . . 1
Not Designated as a Hedge Balance Sheet Classification 2013 2012
December 31,
Foreign currency exchange contracts . . . . . . . . . Accounts, notes, and other receivables . . . . . . . $4 $15
Fair value of derivatives classified as liabilities consist of the following:
Designated as a Hedge Balance Sheet Classification 2013 2012
December 31,
Foreign currency exchange contracts . . . . . . . . . Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . $23 $29
Interest rate swap agreements . . . . . . . . . . . . . . . Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Forward commodity contracts . . . . . . . . . . . . . . . . Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Not Designated as a Hedge Balance Sheet Classification 2013 2012
December 31,
Foreign currency exchange contracts . . . . . . . . . Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4 $3
Gains (losses) recognized in other comprehensive income (effective portions) consist of the
following:
Designated Cash Flow Hedge 2013 2012
Years Ended
December 31,
Foreign currency exchange contracts. . $(37) $31
Forward commodity contracts . . . . . . . . . (1) (8)
Gains (losses) reclassified from AOCI to income consist of the following:
Designated Cash Flow Hedge Income Statement Location 2013 2012
Years Ended
December 31,
Foreign currency exchange contracts . . . . . . . . . Product sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (7) $ (7)
Cost of products sold . . . . . . . . . . . . . . . . . . . . . . . . (4) 23
Sales & general administrative . . . . . . . . . . . . . . . (11) (12)
Forward commodity contracts . . . . . . . . . . . . . . . . Cost of products sold . . . . . . . . . . . . . . . . . . . . . . . . $ (1) $(17)
91
Ineffective portions of commodity derivative instruments designated in cash flow hedge
relationships were insignificant in the years ended December 31, 2013 and 2012 and are classified
within cost of products sold. Foreign currency exchange contracts in cash flow hedge relationships
qualify as critical matched terms hedge relationships and as a result have no ineffectiveness.
Interest rate swap agreements are designated as hedge relationships with gains or (losses) on the
derivative recognized in Interest and other financial charges offsetting the gains and losses on the
underlying debt being hedged. Losses on interest rate swap agreements recognized in earnings were
$91 million in the year ended December 31, 2013. Gains on interest rate swap agreements recognized
in earnings were $12 million in the year ended 2012. Gains and losses are fully offset by losses and
gains on the underlying debt being hedged.
We also economically hedge our exposure to changes in foreign exchange rates principally with
forward contracts. These contracts are marked-to-market with the resulting gains and losses
recognized in earnings offsetting the gains and losses on the non-functional currency denominated
monetary assets and liabilities being hedged. We recognized $162 million and $20 million of income, in
Other (Income) Expense for the years ended December 31, 2013 and 2012, respectively. See Note 4
Other (Income) Expense for further details of the net impact of these economic foreign currency
hedges.
Note 17. Other Liabilities
2013 2012
Years Ended
December 31,
Pension and other employee related . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,756 $4,440
Environmental. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339 350
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 952 550
Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241 273
Asset retirement obligations(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 71
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 47
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334 182
$3,734 $5,913
(1) Asset retirement obligations primarily relate to costs associated with the future retirement of
nuclear fuel conversion facilities in our Performance Materials and Technologies segment and the
future retirement of facilities in our Automation and Control Solutions segment.
A reconciliation of our liability for asset retirement obligations for the year ended December 31,
2013, is as follows:
2013 2012
Change in asset retirement obligations:
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $71 $74
Liabilities settled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) (8)
Adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Accretion expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $68 $71
92
Note 18. Capital Stock
We are authorized to issue up to 2,000,000,000 shares of common stock, with a par value of $1.
Common shareowners are entitled to receive such dividends as may be declared by the Board, are
entitled to one vote per share, and are entitled, in the event of liquidation, to share ratably in all the
assets of Honeywell which are available for distribution to the common shareowners. Common
shareowners do not have preemptive or conversion rights. Shares of common stock issued and
outstanding or held in the treasury are not liable to further calls or assessments. There are no
restrictions on us relative to dividends or the repurchase or redemption of common stock.
In December 2013 the Board of Directors authorized the repurchase of up to a total of $5 billion of
Honeywell common stock, $5 billion remained available as of December 31, 2013 for additional share
repurchases.
We purchased a total of approximately 13.5 million and 5 million shares of our common stock in
2013 and 2012, for $1,073 and $317 million, respectively.
We are authorized to issue up to 40,000,000 shares of preferred stock, without par value, and can
determine the number of shares of each series, and the rights, preferences and limitations of each
series. At December 31, 2013, there was no preferred stock outstanding.
Note 19. Accumulated Other Comprehensive Income (Loss)
Total accumulated other comprehensive income (loss) is included in the Consolidated Statement
of Shareowners Equity. Comprehensive Income (Loss) attributable to noncontrolling interest consisted
predominantly of net income. The changes in Accumulated Other Comprehensive Income (Loss) are
as follows:
Pretax Tax After Tax
Year Ended December 31, 2013
Foreign exchange translation adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . $ (52) $ $ (52)
Pensions and other postretirement benefit adjustments . . . . . . . . . . . . . 3,514 (1,311) 2,203
Changes in fair value of available for sale investments . . . . . . . . . . . . . 30 (17) 13
Changes in fair value of effective cash flow hedges . . . . . . . . . . . . . . . . (14) 7 (7)
$3,478 $(1,321) $2,157
Foreign exchange translation adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 282 $ $ 282
Pensions and other postretirement benefit adjustments . . . . . . . . . . . . . (285) 87 (198)
Changes in fair value of available for sale investments . . . . . . . . . . . . . 54 (60) (6)
Changes in fair value of effective cash flow hedges . . . . . . . . . . . . . . . . 35 (8) 27
$ 86 $ 19 $ 105
Foreign exchange translation adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . $ (146) $ $ (146)
Pensions and other postretirement benefit adjustments . . . . . . . . . . . . . (317) 108 (209)
Changes in fair value of available for sale investments . . . . . . . . . . . . . 12 12
Changes in fair value of effective cash flow hedges . . . . . . . . . . . . . . . . (41) 7 (34)
$ (492) $ 115 $ (377)
93
Components of Accumulated Other Comprehensive Income (Loss)
2013 2012
December 31,
Cumulative foreign exchange translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . $304 $ 356
Pensions and other postretirement benefit adjustments . . . . . . . . . . . . . . . . . . . . . . . . . 355 (1,848)
Change in fair value of available for sale investments . . . . . . . . . . . . . . . . . . . . . . . . . . 170 157
Change in fair value of effective cash flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11) (4)
$818 $(1,339)
Changes in Accumulated Other Comprehensive Income by Component
Foreign
Exchange
Translation
Adjustment
Pension
and Other
Postretirement
Adjustments
Changes in
Fair Value of
Available
for Sale
Investments
Changes in
Fair Value of
Effective
Cash Flow
Hedges Total
Balance at December 31, 2012 . . . . $356 $(1,848) $ 157 $ (4) $(1,339)
Other comprehensive income
(loss) before reclassifications . . (52) 2,161 140 (30) 2,219
Amounts reclassified from
accumulated other
comprehensive income . . . . . . . . 42 (127) 23 (62)
Net current period other
comprehensive income (loss) (52) 2,203 13 (7) 2,157
Balance at December 31, 2013 . . . . $304 $ 355 $ 170 $(11) $ 818
Reclassifications Out of Accumulated Other Comprehensive Income
Product
Sales
Cost of
Products
Sold
Cost of
Services
Sold
Selling,
General and
Administrative
Expenses
Other
(Income)
Expense Total
Affected Line in the Consolidated Statement of Operations
Amortization of Pension and Other
Postretirement Items:
Actuarial losses recognized . . . . . . $ $ 62 $14 $13 $ 89
Prior service cost recognized . . . . 7 1 1 9
Transition obligation recognized . . 2 2
Settlements and curtailments . . . . (30) (6) (6) (42)
Losses on Cash Flow Hedges:
Foreign currency exchange
contracts. . . . . . . . . . . . . . . . . . . . . . 7 4 11 22
Forward commodity contracts . . . . 1 1
Unrealized Gains on Available for
Sale Investments:
Reclassification adjustment for
gains included in net income . . (195) (195)
Total Before Tax . . . . . . . . . . . . . . . . . . . . $ 7 $ 46 $ 9 $19 (195) $(114)
Tax Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Total reclassifications for the period, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (62)
94
Note 20. Stock-Based Compensation Plans
We have stock-based compensation plans available to grant non-qualified stock options, incentive
stock options, stock appreciation rights, restricted units and restricted stock to key employees. Under
the terms of the 2011 Stock Incentive Plan of Honeywell International Inc. and its Affiliates (the Plan)
there were 25,913,501 shares of Honeywell common stock available for future grants at December 31,
2013. Additionally, under the 2006 Stock Plan for Non-Employee Directors of Honeywell International
Inc. (the Directors Plan) there were 145,367 shares of Honeywell common stock available for future
grant at December 31, 2013.
Stock OptionsThe exercise price, term and other conditions applicable to each option granted
under our stock plans are generally determined by the Management Development and Compensation
Committee of the Board. The exercise price of stock options is set on the grant date and may not be
less than the fair market value per share of our stock on that date. The fair value is recognized as an
expense over the employees requisite service period (generally the vesting period of the award).
Options generally vest over a four-year period and expire after ten years.
The fair value of each option award is estimated on the date of grant using the Black-Scholes
option-pricing model. Expected volatility is based on implied volatilities from traded options on our
common stock and historical volatility of our common stock. We used a Monte Carlo simulation model
to derive an expected term. Such model uses historical data to estimate option exercise activity and
post-vest termination behavior. The expected term represents an estimate of the time options are
expected to remain outstanding. The risk-free rate for periods within the contractual life of the option is
based on the U.S. treasury yield curve in effect at the time of grant.
Compensation cost on a pre-tax basis related to stock options recognized in operating results
(included in selling, general and administrative expenses) in 2013, 2012 and 2011 was $70, $65 and
$59 million, respectively. The associated future income tax benefit recognized in 2013, 2012 and 2011
was $24, $23 and $19 million, respectively.
The following table sets forth fair value per share information, including related weighted-average
assumptions, used to determine compensation cost:
2013 2012 2011
Weighted average fair value per share of options granted
during the year(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.85 $13.26 $12.56
Assumptions:
Expected annual dividend yield. . . . . . . . . . . . . . . . . . . . . . . . . 2.55% 2.57% 2.68%
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.73% 30.36% 27.60%
Risk-free rate of return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.91% 1.16% 2.47%
Expected option term (years). . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5 5.8 5.8
(1) Estimated on date of grant using Black-Scholes option-pricing model.
95
The following table summarizes information about stock option activity for the three years ended
December 31, 2013:
Number of
Options
Weighted
Average
Exercise
Price
Outstanding at December 31, 2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,791,531 $39.05
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,625,950 57.08
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,984,840) 36.39
Lapsed or canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,516,271) 42.38
Outstanding at December 31, 2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,916,370 43.01
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,788,734 59.86
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,347,313) 36.52
Lapsed or canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (788,770) 49.76
Outstanding at December 31, 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,569,021 47.13
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,041,422 69.89
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,329,611) 41.91
Lapsed or canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (616,995) 53.84
Outstanding at December 31, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,663,837 $53.27
Vested and expected to vest at December 31, 2013(1) . . . . . . . . . . . . . . . . . . . 28,190,580 $52.20
Exercisable at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,594,410 $45.76
(1) Represents the sum of vested options of 15.6 million and expected to vest options of 12.6 million.
Expected to vest options are derived by applying the pre-vesting forfeiture rate assumption to total
outstanding unvested options of 15.1 million.
The following table summarizes information about stock options outstanding and exercisable at
December 31, 2013:
Range of Exercise prices
Number
Outstanding
Weighted
Average
Life(1)
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
Number
Exercisable
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
Options Outstanding Options Exercisable
$28.35$39.99 . . . . . . . . . . . . . . 3,526,437 3.69 $31.29 $ 212 3,526,437 $31.29 $212
$40.00$49.99 . . . . . . . . . . . . . . 8,018,738 4.69 42.25 394 6,368,574 42.75 310
$50.00$59.99 . . . . . . . . . . . . . . 13,067,490 7.02 58.35 431 5,624,099 58.04 187
$60.00$75.00 . . . . . . . . . . . . . . 6,051,172 9.11 69.70 131 75,300 60.54 2
30,663,837 6.43 53.27 $1,168 15,594,410 45.76 $711
(1) Average remaining contractual life in years.
There were 19,468,017 and 21,672,281 options exercisable at weighted average exercise prices
of $43.64 and $40.71 at December 31, 2012 and 2011, respectively.
The total intrinsic value of options (which is the amount by which the stock price exceeded the
exercise price of the options on the date of exercise) exercised during 2013, 2012 and 2011 was $367,
$202 and $164 million, respectively. During 2013, 2012 and 2011, the amount of cash received from
the exercise of stock options was $432, $305 and $290 million, respectively, with an associated tax
benefit realized of $129, $74 and $54 million, respectively. In 2013, 2012 and 2011 we classified $99,
$56 and $42 million, respectively, of this benefit as a financing cash inflow in the Consolidated
Statement of Cash Flows, and the balance was classified as cash from operations.
96
At December 31, 2013 there was $120 million of total unrecognized compensation cost related to
non-vested stock option awards which is expected to be recognized over a weighted-average period of
2.28 years. The total fair value of options vested during 2013, 2012 and 2011 was $67, $63 and $52
million, respectively.
Restricted Stock UnitsRestricted stock unit (RSU) awards entitle the holder to receive one share of
common stock for each unit when the units vest. RSUs are issued to certain key employees at fair
market value at the date of grant as compensation. RSUs typically become fully vested over periods
ranging from three to seven years and are payable in Honeywell common stock upon vesting.
The following table summarizes information about RSU activity for the three years ended
December 31, 2013:
Number of
Restricted
Stock Units
Weighted
Average
Grant Date
Fair Value
Per Share
Non-vested at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,973,953 $39.89
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,887,733 55.11
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,509,528) 49.48
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (605,725) 40.11
Non-vested at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,746,433 41.35
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,156,753 59.52
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,380,251) 31.84
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (427,196) 45.78
Non-vested at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,095,739 49.91
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,904,504 75.73
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,995,553) 42.17
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (312,470) 56.58
Non-vested at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,692,220 $60.04
As of December 31, 2013, there was approximately $191 million of total unrecognized
compensation cost related to non-vested RSUs granted under our stock plans which is expected to
be recognized over a weighted-average period of 3.42 years. Compensation expense related to RSUs
was $100, $105 and $109 million in 2013, 2012, and 2011, respectively. The associated future income
tax benefit recognized in 2013, 2012 and 2011 was $35, $37, and $36 million, respectively.
Non-Employee Directors PlanUnder the Directors Plan each new non-employee director
receives a one-time grant of 3,000 restricted stock units that will vest on the fifth anniversary of
continuous Board service.
In 2011, each non-employee director received an annual grant to purchase 5,000 shares of
common stock at the fair market value on the date of grant. In 2012, the annual equity grant changed
from a fixed number of shares to a target value of $75,000 and consists of 50 percent options and 50
percent RSUs. Options become exercisable over a four-year period and expire after ten years. RSUs
generally vest on the third anniversary of the date of grant.
Note 21. Redeemable Noncontrolling Interest
As discussed in Note 2 Acquisitions and Divestitures, on October 22, 2012, the Company acquired
a 70 percent controlling interest in Thomas Russell Co. During the calendar year 2016, Honeywell has
the right to acquire and the noncontrolling shareholder has the right to sell to Honeywell the remaining
30 percent interest at a price based on a multiple of Thomas Russell Co.s average annual operating
income from 2013 to 2015, subject to a predetermined cap and floor. Additionally, Honeywell has the
97
right to acquire the remaining 30 percent interest for a fixed price equivalent to the cap at any time on
or before December 31, 2015. Noncontrolling interests with redemption features, such as the
arrangement described above, that are not solely within the Companys control are considered
redeemable noncontrolling interests. Redeemable noncontrolling interest is considered temporary
equity and is therefore reported outside of permanent equity on the Companys Consolidated Balance
Sheet at the greater of the initial carrying amount adjusted for the noncontrolling interests share of net
income (loss) or its redemption value. The Company accretes changes in the redemption value over
the period from the date of acquisition to the date that the redemption feature becomes puttable. The
Company will reflect redemption value adjustments in the earnings per share calculation if redemption
value is in excess of the fair value of the noncontrolling interest.
As of December 31, 2012, the redemption value of the redeemable noncontrolling interest
approximated the carrying value. The rollforward of redeemable noncontrolling interest from December
31, 2012 to December 31, 2013 is as follows:
2013
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $150
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (26)
Redemption value adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $167
Note 22. Commitments and Contingencies
Environmental Matters
We are subject to various federal, state, local and foreign government requirements relating to the
protection of the environment. We believe that, as a general matter, our policies, practices and
procedures are properly designed to prevent unreasonable risk of environmental damage and personal
injury and that our handling, manufacture, use and disposal of hazardous substances are in
accordance with environmental and safety laws and regulations. However, mainly because of past
operations and operations of predecessor companies, we, like other companies engaged in similar
businesses, have incurred remedial response and voluntary cleanup costs for site contamination and
are a party to lawsuits and claims associated with environmental and safety matters, including past
involving environmental matters are likely to continue to arise in the future.
With respect to environmental matters involving site contamination, we continually conduct
studies, individually or jointly with other potentially responsible parties, to determine the feasibility of
various remedial techniques. It is our policy to record appropriate liabilities for environmental matters
when remedial efforts or damage claim payments are probable and the costs can be reasonably
estimated. Such liabilities are based on our best estimate of the undiscounted future costs required to
complete the remedial work. The recorded liabilities are adjusted periodically as remediation efforts
progress or as additional technical, regulatory or legal information becomes available. Given the
uncertainties regarding the status of laws, regulations, enforcement policies, the impact of other
potentially responsible parties, technology and information related to individual sites, we do not believe
it is possible to develop an estimate of the range of reasonably possible environmental loss in excess
of our recorded liabilities. We expect to fund expenditures for these matters from operating cash flow.
The timing of cash expenditures depends on a number of factors, including the timing of remedial
investigations and feasibility studies, the timing of litigation and settlements of remediation liability,
personal injury and property damage claims, regulatory approval of cleanup projects, remedial
techniques to be utilized and agreements with other parties.
98
The following table summarizes information concerning our recorded liabilities for environmental
costs:
2013 2012 2011
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 654 $ 723 $ 753
Accruals for environmental matters deemed probable and
reasonably estimable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272 234 240
Environmental liability payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (304) (320) (270)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 17
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 643 $ 654 $ 723
Environmental liabilities are included in the following balance sheet accounts:
December 31,
2013
December 31,
2012
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $304 $304
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339 350
$643 $654
Although we do not currently possess sufficient information to reasonably estimate the amounts of
liabilities to be recorded upon future completion of studies, litigation or settlements, and neither the
timing nor the amount of the ultimate costs associated with environmental matters can be determined,
they could be material to our consolidated results of operations or operating cash flows in the periods
recognized or paid. However, considering our past experience and existing reserves, we do not expect
that these environmental matters will have a material adverse effect on our consolidated financial
position.
New Jersey Chrome SitesThe excavation and offsite disposal of approximately one million
tons of chromium residue present at a predecessor Honeywell site located in Jersey City, New Jersey,
known as Study Area 7, was completed in January 2010. We are also implementing related
groundwater remedial actions, and are conducting related river sediment work. In addition, remedial
investigations and related activities are underway at other sites in Hudson County, New Jersey that
allegedly have chromium contamination, and for which Honeywell has accepted responsibility in whole
or in part. Provisions have been made in our financial statements for the estimated cost of
investigations and implementation of these remedies consistent with the accounting policy described
above. We do not believe that these matters will have a material adverse impact on our consolidated
results of operations, financial position or operating cash flows.
Onondaga Lake, Syracuse, NYWe are implementing a combined dredging/capping remedy of
Onondaga Lake pursuant to a consent decree approved by the United States District Court for the
Northern District of New York in January 2007. We have accrued for our estimated cost of remediating
Onondaga Lake based on currently available information and analysis performed by our engineering
consultants. Honeywell is also conducting remedial investigations and activities at other sites in
Syracuse. We have recorded reserves for these investigations and activities where appropriate,
consistent with the accounting policy described above.
Honeywell has entered into a cooperative agreement with potential natural resource trustees to
assess alleged natural resource damages relating to this site. It is not possible to predict the outcome
or duration of this assessment, or the amounts of, or responsibility for, any damages.
99
Asbestos Matters
Like many other industrial companies, Honeywell is a defendant in personal injury actions related
to asbestos. We did not mine or produce asbestos, nor did we make or sell insulation products or other
construction materials that have been identified as the primary cause of asbestos related disease in
the vast majority of claimants.
Honeywells predecessors owned North American Refractories Company (NARCO) from 1979 to
1986. NARCO produced refractory products (bricks and cement used in high temperature
applications). We sold the NARCO business in 1986 and agreed to indemnify NARCO with respect
to personal injury claims for products that had been discontinued prior to the sale (as defined in the
sale agreement). NARCO retained all liability for all other claims. NARCO and/or Honeywell are
defendants in asbestos personal injury cases asserting claims based upon alleged exposure to
NARCO asbestos-containing products. Claimants consist largely of individuals who allege exposure to
NARCO asbestos-containing refractory products in an occupational setting. These claims, and the
filing of subsequent claims, were stayed continuously since January 4, 2002, the date on which
NARCO sought bankruptcy protection (see discussion below).
Honeywells Bendix friction materials (Bendix) business manufactured automotive brake parts that
contained chrysotile asbestos in an encapsulated form. Claimants consist largely of individuals who
allege exposure to asbestos from brakes from either performing or being in the vicinity of individuals
who performed brake replacements.
The following tables summarize information concerning NARCO and Bendix asbestos related
balances:
Asbestos Related Liabilities
Bendix NARCO Total Bendix NARCO Total Bendix NARCO Total
2013 2012 2011
Year Ended December 31, Year Ended December 31, Year Ended December 31,
Beginning of year . . . . . . . . . $ 653 $1,119 $1,772 $ 613 $1,123 $1,736 $ 594 $1,125 $1,719
Accrual for update to
estimated liability . . . . . . . 180 5 185 168 (1) 167 167 3 170
Change in estimated cost
of future claims . . . . . . . . . 16 16 30 30 16 16
Update of expected
resolution values for
pending claims . . . . . . . . . (5) (5) 8 8 2 2
Asbestos related liability
payments. . . . . . . . . . . . . . . (188) (169) (357) (166) (3) (169) (166) (5) (171)
End of year. . . . . . . . . . . . . . . $ 656 $ 955 $1,611 $ 653 $1,119 $1,772 $ 613 $1,123 $1,736
100
Insurance Recoveries for Asbestos Related Liabilities
Bendix NARCO Total Bendix NARCO Total Bendix NARCO Total
2013 2012 2011
Year Ended December 31, Year Ended December 31, Year Ended December 31,
Beginning of year. . . . . . . . . . . . . . . . $138 $569 $707 $162 $618 $ 780 $157 $ 718 $ 875
Probable insurance recoveries
related to estimated liability . . . . 27 27 28 28 29 29
Insurance receipts for asbestos
related liabilities . . . . . . . . . . . . . . . (24) (34) (58) (60) (62) (122) (34) (100) (134)
Insurance receivables settlements
and write offs . . . . . . . . . . . . . . . . . (6) (6) 8 13 21 10 10
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2
End of year . . . . . . . . . . . . . . . . . . . . . $141 $531 $672 $138 $569 $ 707 $162 $ 618 $ 780
NARCO and Bendix asbestos related balances are included in the following balance sheet
accounts:
2013 2012
December 31,
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 77 $ 44
Insurance recoveries for asbestos related liabilities. . . . . . . . . . . . . . . . . . . . . . 595 663
$ 672 $ 707
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 461 $ 480
Asbestos related liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,150 1,292
$1,611 $1,772
NARCO ProductsOn January 4, 2002, NARCO filed a petition for reorganization under Chapter
11 of the U.S. Bankruptcy Code. In connection with the filing of NARCOs petition in 2002, the U.S.
Bankruptcy Court for the Western District of Pennsylvania (the Bankruptcy Court) issued an injunction
staying the prosecution of NARCO-related asbestos claims against the Company, which stayed in
place throughout NARCOs Chapter 11 case. In November 2007, the Bankruptcy Court confirmed
NARCOs Third Amended Plan of Reorganization (NARCO Plan of Reorganization) and it became fully
effective on April 30, 2013.
In connection with implementation of the NARCO Plan of Reorganization, a federally authorized
524(g) trust (NARCO Trust) was established for the evaluation and resolution of all existing and
future NARCO asbestos claims. Both Honeywell and NARCO are protected by a permanent
channeling injunction barring all present and future individual actions in state or federal courts and
requiring all asbestos related claims based on exposure to NARCO products to be made against the
NARCO Trust. The NARCO Trust will review submitted claims and determine award amounts in
accordance with established Trust Distribution Procedures approved by the Bankruptcy Court which
set forth all criteria claimants must meet to qualify for compensation including, among other things,
exposure and medical criteria that determine the award amount. In addition, Honeywell will continue to
provide input to the detailed controls design of the NARCO Trust, and has on-going audit rights to
review and monitor claims processors adherence to the established requirements of the Trust
Distribution Procedures and as a means of detecting and deterring irregularities in claims.
In connection with NARCOs bankruptcy filing, Honeywell agreed to certain obligations which were
triggered upon the effective date of the NARCO Plan of Reorganization. As agreed, during the second
quarter of 2013, we provided NARCO with $17 million in financing and simultaneously forgave such
indebtedness. We also paid $40 million to NARCOs former parent company and $16 million to certain
101
asbestos claimants whose claims were fully resolved during the pendency of the NARCO bankruptcy
proceedings.
Honeywell is obligated to fund NARCO asbestos claims submitted to the trust which qualify for
payment under the Trust Distribution Procedures, subject to annual caps of $140 million in the years
2014 through 2018 and $145 million for each year thereafter, provided, however, that the first $100
million of claims processed through the NARCO Trust (the Initial Claims Amount) will not count
against the first year annual cap and any unused portion of the Initial Claims Amount will roll over to
subsequent years until fully utilized.
Honeywell will also be responsible for the following funding obligations which are not subject to the
annual cap described above: a) previously approved payments due to claimants pursuant to settlement
agreements reached during the pendency of the NARCO bankruptcy proceedings which provide that a
portion of these settlements is to be paid by the NARCO Trust, which amounts are estimated at $130
million and are expected to be paid during the first year of trust operations ($91 million of which was
paid during 2013) and, b) payments due to claimants pursuant to settlement agreements reached
during the pendency of the NARCO bankruptcy proceedings that provide for the right to submit claims
to the NARCO Trust subject to qualification under the terms of the settlement agreements and Trust
Distribution Procedures criteria, which amounts are estimated at $150 million and are expected to be
paid during the first two years of trust operations.
Our consolidated financial statements reflect an estimated liability for the amounts discussed
above, unsettled claims pending as of the time NARCO filed for bankruptcy protection and for the
estimated value of future NARCO asbestos claims expected to be asserted against the NARCO Trust
through 2018. In light of the uncertainties inherent in making long-term projections and in connection
with the initial operation of a 524(g) trust, as well as the stay of all NARCO asbestos claims which
remained in place throughout NARCOs Chapter 11 case, we do not believe that we have a reasonable
basis for estimating NARCO asbestos claims beyond 2018. In the absence of actual trust experience
on which to base the estimate, Honeywell projected the probable value, including trust claim handling
costs, of asbestos related future liabilities based on Company specific and general asbestos claims
filing rates, expected rates of disease and anticipated claim values. Specifically, the valuation
methodology included an analysis of the population likely to have been exposed to asbestos containing
products, epidemiological studies estimating the number of people likely to develop asbestos related
diseases, NARCO asbestos claims filing history, general asbestos claims filing rates in the tort system
and in certain operating asbestos trusts, and the claims experience in those forums, the pending
inventory of NARCO asbestos claims, disease criteria and payment values contained in the Trust
Distribution Procedures and an estimated approval rate of claims submitted to the NARCO Trust. This
methodology used to estimate the liability for future claims has been commonly accepted by numerous
bankruptcy courts addressing 524(g) trusts and resulted in a range of estimated liability of $743 to
$961 million. We believe that no amount within this range is a better estimate than any other amount
and accordingly, we have recorded the minimum amount in the range.
Our insurance receivable corresponding to the estimated liability for pending and future NARCO
asbestos claims reflects coverage which reimburses Honeywell for portions of NARCO-related
indemnity and defense costs and is provided by a large number of insurance policies written by dozens
of insurance companies in both the domestic insurance market and the London excess market. We
conduct analyses to determine the amount of insurance that we estimate is probable of recovery in
relation to payment of current and estimated future claims. While the substantial majority of our
insurance carriers are solvent, some of our individual carriers are insolvent, which has been considered
in our analysis of probable recoveries. We made judgments concerning insurance coverage that we
believe are reasonable and consistent with our historical dealings and our knowledge of any pertinent
solvency issues surrounding insurers.
102
Projecting future events is subject to many uncertainties that could cause the NARCO-related
asbestos liabilities or assets to be higher or lower than those projected and recorded. There is no
assurance that insurance recoveries will be timely or whether there will be any NARCO-related
asbestos claims beyond 2018. Given the inherent uncertainty in predicting future events, we review our
estimates periodically, and update them based on our experience and other relevant factors. Similarly,
we will reevaluate our projections concerning our probable insurance recoveries in light of any changes
to the projected liability or other developments that may impact insurance recoveries.
Friction ProductsThe following tables present information regarding Bendix related asbestos
claims activity:
Claims Activity 2013 2012
Years Ended
December 31,
Claims Unresolved at the beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,141 22,571
Claims Filed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,527 3,920
Claims Resolved(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,366) (3,350)
Claims Unresolved at the end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,302 23,141
(a) Claims resolved in 2013 includes significantly aged (i.e., pending for more than six years) claims
totaling 12,250 of which 92% were non-malignant.
Disease Distribution of Unresolved Claims 2013 2012
December 31,
Mesothelioma and Other Cancer Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,810 5,367
Nonmalignant Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,492 17,774
Total Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,302 23,141
Honeywell has experienced average resolution values per claim excluding legal costs as follows:
2013 2012 2011 2010 2009
(in whole dollars)
Malignant claims . . . . . . . . . . . . . . . . . . . . . $51,000 $49,000 $48,000 $54,000 $50,000
Nonmalignant claims. . . . . . . . . . . . . . . . . . $ 850 $ 1,400 $ 1,000 $ 1,300 $ 200
It is not possible to predict whether resolution values for Bendix-related asbestos claims will
increase, decrease or stabilize in the future.
Our consolidated financial statements reflect an estimated liability for resolution of pending (claims
actually filed as of the financial statement date) and future Bendix-related asbestos claims. We have
valued Bendix pending and future claims using average resolution values for the previous five years.
We update the resolution values used to estimate the cost of Bendix pending and future claims during
the fourth quarter each year.
The liability for future claims represents the estimated value of future asbestos related bodily injury
claims expected to be asserted against Bendix over the next five years. Such estimated cost of future
Bendix-related asbestos claims is based on historic claims filing experience and dismissal rates,
disease classifications, and resolution values in the tort system for the previous five years. In light of
the uncertainties inherent in making long-term projections, as well as certain factors unique to friction
product asbestos claims, we do not believe that we have a reasonable basis for estimating asbestos
claims beyond the next five years. The methodology used to estimate the liability for future claims is
similar to that used to estimate the future NARCO-related asbestos claims liability.
103
Our insurance receivable corresponding to the liability for settlement of pending and future Bendix
asbestos claims reflects coverage which is provided by a large number of insurance policies written by
dozens of insurance companies in both the domestic insurance market and the London excess market.
Based on our ongoing analysis of the probable insurance recovery, insurance receivables are recorded
in the financial statements simultaneous with the recording of the estimated liability for the underlying
asbestos claims. This determination is based on our analysis of the underlying insurance policies, our
historical experience with our insurers, our ongoing review of the solvency of our insurers, judicial
determinations relevant to our insurance programs, and our consideration of the impacts of any
settlements reached with our insurers.
On a cumulative historical basis, Honeywell has recorded insurance receivables equal to
approximately 36 percent of the value of the underlying asbestos claims recorded. However, because
there are gaps in our coverage due to insurance company insolvencies, certain uninsured periods, and
insurance settlements, this rate is expected to decline for any future Bendix-related asbestos liabilities
that may be recorded. Future recoverability rates may also be impacted by numerous other factors,
such as future insurance settlements, insolvencies and judicial determinations relevant to our coverage
program, which are difficult to predict. Assuming continued defense and indemnity spending at current
levels, we estimate that the cumulative recoverability rate could decline over the next five years to
approximately 30 percent.
Honeywell believes it has sufficient insurance coverage and reserves to cover all pending Bendix-
related asbestos claims and Bendix-related asbestos claims estimated to be filed within the next five
years. Although it is impossible to predict the outcome of either pending or future Bendix-related
asbestos claims, we do not believe that such claims would have a material adverse effect on our
consolidated financial position in light of our insurance coverage and our prior experience in resolving
such claims. If the rate and types of claims filed, the average resolution value of such claims and the
period of time over which claim settlements are paid (collectively, the Variable Claims Factors) do not
substantially change, Honeywell would not expect future Bendix-related asbestos claims to have a
material adverse effect on our results of operations or operating cash flows in any fiscal year. No
assurances can be given, however, that the Variable Claims Factors will not change.
Other Matters
We are subject to a number of other lawsuits, investigations and disputes (some of which involve
substantial amounts claimed) arising out of the conduct of our business, including matters relating to
commercial transactions, government contracts, product liability, prior acquisitions and divestitures,
employee benefit plans, intellectual property, and environmental, health and safety matters. We
recognize a liability for any contingency that is probable of occurrence and reasonably estimable. We
continually assess the likelihood of adverse judgments of outcomes in these matters, as well as
potential ranges of possible losses (taking into consideration any insurance recoveries), based on a
careful analysis of each matter with the assistance of outside legal counsel and, if applicable, other
experts. Included in these other matters are the following:
Honeywell v. United Auto Workers (UAW) et. alIn July 2011, Honeywell filed an action in
federal court (District of New Jersey) against the UAW and all former employees who retired under a
series of Master Collective Bargaining Agreements (MCBAs) between Honeywell and the UAW. The
Company is seeking a declaratory judgment that certain express limitations on its obligation to
contribute toward the healthcare coverage of such retirees (the CAPS) set forth in the MCBAs may
be implemented, effective January 1, 2012. In September 2011, the UAW and certain retiree
defendants filed a motion to dismiss the New Jersey action and filed suit in the Eastern District of
Michigan alleging that the MCBAs do not provide for CAPS on the Companys liability for healthcare
coverage. The UAW and retiree plaintiffs subsequently filed a motion for class certification and a
motion for partial summary judgment in the Michigan action, seeking a ruling that retirees who retired
104
prior to the initial inclusion of the CAPS in the 2003 MCBA are not covered by the CAPS as a matter of
law. In December 2011, the New Jersey action was dismissed on forum grounds. Honeywell appealed
the New Jersey courts dismissal to the United States Court of Appeals for the Third Circuit. The Third
Circuit denied the appeal. Honeywell has now answered the UAWs complaint in Michigan and has
asserted counterclaims for fraudulent inducement, negligent misrepresentation and breach of implied
warranty. The parties stipulated to the certification of a class of all potentially affected retirees,
surviving spouses, and eligible dependents. The UAW filed a motion to dismiss these counterclaims.
The court dismissed Honeywells fraudulent inducement and negligent misrepresentation claims, but let
stand the claim for breach of implied warranty. Honeywell is confident that the CAPS will be upheld and
that its liability for healthcare coverage premiums with respect to the putative class will be limited as
negotiated and expressly set forth in the applicable MCBAs. In the event of an adverse ruling,
however, Honeywells other postretirement benefits for pre-2003 retirees would increase by
approximately $180 million, reflecting the estimated value of these CAPS.
Joint Strike Fighter InvestigationIn 2013 the Company received subpoenas from the
Department of Justice requesting information relating primarily to parts manufactured in the United
Kingdom and China used in the F-35 fighter jet. The Company is cooperating fully with the
investigation. While we believe that Honeywell has complied with all relevant U.S. laws and regulations
regarding the manufacture of these sensors, it is not possible to predict the outcome of the
investigation or what action, if any, may result from it.
Given the uncertainty inherent in litigation and investigations (including the specific matters
referenced above), we do not believe it is possible to develop estimates of reasonably possible loss in
excess of current accruals for these matters (other than as specifically set forth above). Considering
our past experience and existing accruals, we do not expect the outcome of these matters, either
individually or in the aggregate, to have a material adverse effect on our consolidated financial position.
Because most contingencies are resolved over long periods of time, potential liabilities are subject to
change due to new developments, changes in settlement strategy or the impact of evidentiary
requirements, which could cause us to pay damage awards or settlements (or become subject to
equitable remedies) that could have a material adverse effect on our results of operations or operating
cash flows in the periods recognized or paid.
Warranties and GuaranteesWe have issued or are a party to the following direct and indirect
guarantees at December 31, 2013:
Maximum
Potential
Future
Payments
Operating lease residual values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $40
Other third parties financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Customer financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
$49
We do not expect that these guarantees will have a material adverse effect on our consolidated
In connection with the disposition of certain businesses and facilities we have indemnified the
purchasers for the expected cost of remediation of environmental contamination, if any, existing on the
date of disposition. Such expected costs are accrued when environmental assessments are made or
remedial efforts are probable and the costs can be reasonably estimated.
In the normal course of business we issue product warranties and product performance
guarantees. We accrue for the estimated cost of product warranties and performance guarantees
based on contract terms and historical experience at the time of sale. Adjustments to initial obligations
for warranties and guarantees are made as changes in the obligations become reasonably estimable.
105
The following table summarizes information concerning our recorded obligations for product warranties
and product performance guarantees:
2013 2012 2011
Years Ended
December 31,
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 407 $ 402 $ 415
Accruals for warranties/guarantees issued during the year . . . . . . . . . 212 196 197
Adjustment of pre-existing warranties/guarantees. . . . . . . . . . . . . . . . . . (1) (20) (2)
Settlement of warranty/guarantee claims . . . . . . . . . . . . . . . . . . . . . . . . . . (213) (171) (208)
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 405 $ 407 $ 402
Product warranties and product performance guarantees are included in the following balance
sheet accounts:
2013 2012
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $323 $375
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 32
$405 $407
106
Note 23. Pension and Other Postretirement Benefits
We sponsor both funded and unfunded U.S. and non-U.S. defined benefit pension plans covering
the majority of our employees and retirees. Pension benefits for substantially all U.S. employees are
provided through non-contributory, qualified and non-qualified defined benefit pension plans. U.S.
defined benefit pension plans comprise 75 percent of our projected benefit obligation. All non-union
hourly and salaried employees joining Honeywell for the first time after December 31, 2012, are not
eligible to participate in Honeywells U.S. defined benefit pension plans. Non-U.S. employees, who are
not U.S. citizens, are covered by various retirement benefit arrangements, some of which are
considered to be defined benefit pension plans for accounting purposes. Non-U.S. defined benefit
pension plans comprise 25 percent of our projected benefit obligation.
We also sponsor postretirement benefit plans that provide health care benefits and life insurance
coverage to eligible retirees. Our retiree medical plans mainly cover U.S. employees who retire with
pension eligibility for prescription drug, hospital, professional and other medical services. Most of the
U.S. retiree medical plans require deductibles and copayments, and virtually all are integrated with
Medicare. Retiree contributions are generally required based on coverage type, plan and Medicare
eligibility. All non-union hourly and salaried employees joining Honeywell after January 1, 2000 are not
eligible to participate in our retiree medical and life insurance plans. Less than 5 percent of Honeywells
U.S. employees are eligible for a retiree medical subsidy from the Company; and this subsidy is limited
to a fixed-dollar amount. In addition, more than seventy-five percent of Honeywells current retirees
either have no Company subsidy or have a fixed-dollar subsidy amount. This significantly limits our
exposure to the impact of future health care cost increases. The retiree medical and life insurance
plans are not funded. Claims and expenses are paid from our operating cash flow.
In 2013, Honeywell amended its U.S. retiree medical plans to no longer offer certain retirees
Company group coverage. This plan amendment reduced the accumulated postretirement benefit
obligation by $166 million which will be recognized as part of net periodic postretirement benefit cost
over the expected future lifetime of the remaining participants in the plans. Also in 2013, in connection
with a new collective bargaining agreement reached with a union group, Honeywell amended its plans
eliminating the Company subsidy for these union employees. The plan amendment resulted in a
curtailment gain of $42 million which was included as part of net periodic postretirement benefit cost.
The curtailment gain represents the recognition in net periodic postretirement benefit cost of prior
service credits attributable to the future years of service of the union group for which future accrual of
benefits has been eliminated.
In 2011, in connection with new collective bargaining agreements reached with several of its union
groups, Honeywell amended its U.S. retiree medical plans eliminating the subsidy for those union
employees which resulted in curtailment gains totaling $167 million. The curtailment gains represented
the recognition in net periodic postretirement benefit cost of prior service credits attributable to the
future years of service of the union groups for which future accrual of benefits was eliminated.
The following tables summarize the balance sheet impact, including the benefit obligations, assets
and funded status associated with our significant pension and other postretirement benefit plans at
December 31, 2013 and 2012.
107
2013 2012 2013 2012
U.S. Plans Non-U.S. Plans
Pension Benefits
Change in benefit obligation:
Benefit obligation at beginning of year. . . . . . . . . . . . . . . . . . $17,117 $15,600 $5,272 $4,648
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272 256 58 48
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677 738 215 221
Plan amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Actuarial (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (975) 1,493 72 372
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190 44
Benefits paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,005) (970) (198) (188)
Settlements and curtailments . . . . . . . . . . . . . . . . . . . . . . . . . . (16)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 187
Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . 16,290 17,117 5,523 5,272
Change in plan assets:
Fair value of plan assets at beginning of year . . . . . . . . . . 14,345 12,836 4,527 3,958
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,191 1,654 428 336
Company contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 825 183 271
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 45
Benefits paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,005) (970) (198) (188)
Settlements and curtailments . . . . . . . . . . . . . . . . . . . . . . . . . . (16)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 166
Fair value of plan assets at end of year . . . . . . . . . . . . . . . . 16,727 14,345 5,037 4,527
Funded status of plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 437 $ (2,772) $ (486) $ (745)
Amounts recognized in Consolidated Balance Sheet consist
of:
Prepaid pension benefit cost(1) . . . . . . . . . . . . . . . . . . . . . . . . $ 839 $ $ 120 $ 87
Accrued pension liability(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . (402) (2,772) (606) (832)
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 437 $ (2,772) $ (486) $ (745)
(1) Included in Other Assets on Consolidated Balance Sheet
(2) Included in Other Liabilities - Non-Current on Consolidated Balance Sheet
108
2013 2012
Other
Postretirement
Benefits
Change in benefit obligation:
Benefit obligation at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,477 $ 1,534
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 53
Plan amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (175) (1)
Actuarial (gains) losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (108) 34
Benefits paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (142) (144)
Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,096 1,477
Change in plan assets:
Fair value of plan assets at beginning of year . . . . . . . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Company contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . . .
Funded status of plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,096) $(1,477)
Amounts recognized in Consolidated Balance Sheet consist of:
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (130) (167)
Postretirement benefit obligations other than pensions(1) . . . . . . . . (966) (1,310)
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,096) $(1,477)
(1) Excludes Non-U.S. plans of $53 and $55 million in 2013 and 2012, respectively.
Amounts recognized in Accumulated Other Comprehensive (Income) Loss associated with our
significant pension and other postretirement benefit plans at December 31, 2013 and 2012 are as
follows:
2013 2012 2013 2012
Pension Benefits
Transition obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ $ 3 $ 5
Prior service cost (credit) . . . . . . . . . . . . . . . . . . . . . . . . . . 111 120 (14) (16)
Net actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,378) 1,712 434 530
Net amount recognized. . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,267) $1,832 $423 $519
2013 2012
Other
Postretirement
Benefits
Prior service (credit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(168) $ (48)
Net actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256 391
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 88 $343
109
The components of net periodic benefit cost and other amounts recognized in other
comprehensive (income) loss for our significant plans for the years ended December 31, 2013,
2012, and 2011 include the following components:
Net Periodic Benefit Cost 2013 2012 2011 2013 2012 2011
Pension Benefits
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 272 $ 256 $ 232 $ 58 $ 48 $ 59
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677 738 761 215 221 239
Expected return on plan assets. . . . . . . . . . . . . . (1,076) (1,020) (1,014) (308) (291) (284)
Amortization of transition obligation . . . . . . . . . . 2 2 2
Amortization of prior service cost (credit). . . . . 23 28 33 (2) (2) (2)
Recognition of actuarial losses . . . . . . . . . . . . . . 707 1,568 51 250 234
Settlements and curtailments . . . . . . . . . . . . . . . . 24 2 1
Net periodic benefit (income) cost . . . . . . . . . . . $ (104) $ 709 $ 1,604 $ 16 $ 230 $ 249
Other Changes in Plan Assets and
Benefits Obligations Recognized in
Other Comprehensive (Income) Loss
2013 2012 2011 2013 2012 2011
Actuarial (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . $(3,090) $ 859 $ 1,628 $(48) $ 327 $ 368
Prior service cost (credit). . . . . . . . . . . . . . . . . . . . . . . 14 5
Transition obligation recognized during year . . . . . (2) (2) (2)
Prior service (cost) credit recognized during
year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23) (28) (33) 2 2 2
Actuarial losses recognized during year . . . . . . . . . (707) (1,568) (51) (250) (234)
Foreign exchange translation adjustments. . . . . . . 3 23 (11)
Total recognized in other comprehensive
(income) loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . $(3,099) $ 124 $ 32 $(96) $ 100 $ 123
Total recognized in net periodic benefit
(income) cost and other comprehensive
(income) loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . $(3,203) $ 833 $ 1,636 $(80) $ 330 $ 372
The estimated prior service cost (credit) for pension benefits that will be amortized from
accumulated other comprehensive (income) loss into net periodic benefit cost in 2014 are expected to
be $23 million and $(2) million for U.S. and Non-U.S. benefit plans, respectively.
Net Periodic Benefit Cost 2013 2012 2011
Other Postretirement
Benefits Years Ended
December 31,
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 1 $ 1
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 53 69
Amortization of prior service (credit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13) (14) (34)
Recognition of actuarial losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 34 38
Settlements and curtailments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (42) (6) (167)
Net periodic benefit (income) cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16 $ 68 $ (93)
110
Other Changes in Plan Assets and Benefits Obligations
Recognized in Other Comprehensive (Income) Loss
2013 2012 2011
Actuarial (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(108) $ 34 $ 6
Prior service (credit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (175) (1) (21)
Prior service credit recognized during year . . . . . . . . . . . . . . . . . . . . . . . . . . 13 14 34
Actuarial losses recognized during year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27) (34) (38)
Settlements and curtailments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 6 167
Total recognized in other comprehensive (income) loss. . . . . . . . . . $(255) $ 19 $148
Total recognized in net periodic benefit (income) cost and other
comprehensive (income) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(239) $ 87 $ 55
The estimated net loss and prior service (credit) for other postretirement benefits that will be
amortized from accumulated other comprehensive (income) loss into net periodic benefit cost in 2014
are expected to be $24 and $(20) million, respectively.
Major actuarial assumptions used in determining the benefit obligations and net periodic benefit
cost for our significant benefit plans are presented in the following table.
2013 2012 2011 2013 2012 2011
Pension Benefits
Actuarial assumptions used to determine benefit
obligations as of December 31:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.89% 4.06% 4.89% 4.29% 4.29% 4.84%
Expected annual rate of compensation
increase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.50% 4.50% 4.50% 2.81% 3.55% 3.67%
Actuarial assumptions used to determine net
periodic benefit (income) cost for years ended
December 31:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.06% 4.89% 5.25% 4.29% 4.84% 5.40%
Expected rate of return on plan assets. . . . . . . . 7.75% 8.00% 8.00% 6.99% 7.03% 7.06%
Expected annual rate of compensation
increase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.50% 4.50% 4.50% 3.55% 3.67% 3.79%
2013 2012 2011
Other
Postretirement
Benefits
Actuarial assumptions used to determine benefit obligations as of
December 31:
Discount rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.05% 3.40% 4.00%
Actuarial assumptions used to determine net periodic benefit cost for
years ended December 31:
Discount rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.40% 4.00% 4.70%
The discount rate for our U.S. pension and other postretirement benefits plans reflects the current
rate at which the associated liabilities could be settled at the measurement date of December 31. To
determine discount rates for our U.S. pension and other postretirement benefit plans, we use a
modeling process that involves matching the expected cash outflows of our benefit plans to a yield
curve constructed from a portfolio of high quality, fixed-income debt instruments. We use the average
yield of this hypothetical portfolio as a discount rate benchmark. The discount rate used to determine
the other postretirement benefit obligation is lower principally due to a shorter expected duration of
other postretirement plan obligations as compared to pension plan obligations.
Our expected rate of return on U.S. plan assets of 7.75 percent is a long-term rate based on
historical plan asset returns over varying long-term periods combined with current market conditions
111
and broad asset mix considerations. We review the expected rate of return on an annual basis and
revise it as appropriate.
For non-U.S. benefit plans, none of which was individually material, assumptions reflect economic
assumptions applicable to each country.
Pension Benefits
Included in the aggregate data in the tables above are the amounts applicable to our pension
plans with accumulated benefit obligations exceeding the fair value of plan assets. Amounts related to
such plans were as follows:
2013 2012 2013 2012
December 31,
Projected benefit obligation. . . . . . . . . . . . . . . . . . . . . . . . $576 $17,117 $911 $4,670
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . $569 $16,288 $855 $4,426
Fair value of plan assets. . . . . . . . . . . . . . . . . . . . . . . . . . $174 $14,345 $307 $3,837
Accumulated benefit obligation for our U.S. defined benefit pension plans were $15.7 and $16.3
billion and for our Non-U.S. defined benefit plans were $5.3 and $5.0 billion at December 31, 2013 and
2012, respectively.
Our asset investment strategy for our U.S. pension plans focuses on maintaining a diversified
portfolio using various asset classes in order to achieve our long-term investment objectives on a risk
adjusted basis. Our actual invested positions in various securities change over time based on short
and longer-term investment opportunities. To achieve our objectives, we have established long-term
target allocations as follows: 60-70 percent equity securities, 10-20 percent fixed income securities and
cash, 5-15 percent real estate investments, and 10-20 percent other types of investments. Equity
securities include publicly-traded stock of companies located both inside and outside the United States.
Fixed income securities include corporate bonds of companies from diversified industries, mortgage-
backed securities, and U.S. Treasuries. Real estate investments include direct investments in
commercial properties and investments in real estate funds. Other types of investments include
investments in private equity and hedge funds that follow several different strategies. We review our
assets on a regular basis to ensure that we are within the targeted asset allocation ranges and, if
necessary, asset balances are adjusted back within target allocations.
Our non-U.S. pension assets are typically managed by decentralized fiduciary committees with the
Honeywell Corporate Investments group providing standard funding and investment guidance. Local
regulations, local funding rules, and local financial and tax considerations are part of the funding and
investment allocation process in each country. While our non-U.S. investment policies are different for
each country, the long-term investment objectives are generally the same as those for the U.S.
pension assets.
112
The fair values of both our U.S. and non-U.S. pension plans assets at December 31, 2013 and
2012 by asset category are as follows:
Total Level 1 Level 2 Level 3
December 31, 2013
U.S. Plans
Common stock/preferred stock:
Honeywell common stock. . . . . . . . . . . . . . . . . . . . . . . . . $ 1,697 $ 1,697 $ $
U.S. large cap stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,147 4,107 40
U.S. mid cap stocks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 757 752 5
U.S. small cap stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215 210 5
International stocks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,685 2,503 182
Real estate investment trusts . . . . . . . . . . . . . . . . . . . . . 90 90
Fixed income investments:
Short term investments. . . . . . . . . . . . . . . . . . . . . . . . . . . 956 955 1
Government securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 266 266
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,931 2,931
Mortgage/Asset-backed securities . . . . . . . . . . . . . . . . . 770 770
Insurance contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 7
Investments in private funds:
Private funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,058 1,058
Hedge funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 6
Real estate funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237 237
Direct investments:
Direct private investments . . . . . . . . . . . . . . . . . . . . . . . . 278 278
Real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 627 627
$16,727 $10,314 $4,207 $2,206
December 31, 2012
U.S. Plans
Honeywell common stock. . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,182 $1,182 $ $
U.S. large cap stocks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,903 2,903
U.S. mid cap stocks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 731 731
U.S. small cap stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261 261
International stocks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,203 2,073 130
Real estate investment trusts . . . . . . . . . . . . . . . . . . . . . . 44 44
Short term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,139 1,139
Government securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266 266
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,728 2,728
Mortgage/Asset-backed securities . . . . . . . . . . . . . . . . . . 654 654
Insurance contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 6
Private funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,100 1,100
Hedge funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 52
Real estate funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254 254
Direct investments:
Direct private investments . . . . . . . . . . . . . . . . . . . . . . . . . 227 227
Real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595 595
$14,345 $8,333 $3,784 $2,228
113
December 31, 2013
Non-U.S. Plans
U.S. companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 459 $394 $ 65 $
Non-U.S. companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,929 244 1,685
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147 140 7
Government securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,303 1,303
Corporate bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 656 656
Mortgage/Asset-backed securities . . . . . . . . . . . . . . . . . . . . 25 25
Insurance contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208 208
Private funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 67
Hedge funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 62
Real estate funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181 181
$5,037 $778 $3,949 $310
December 31, 2012
Non-U.S. Plans
U.S. companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 366 $316 $ 50 $
Non-U.S. companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,605 176 1,429
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 104
Government securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,321 1,321
Corporate bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 571 571
Mortgage/Asset-backed securities . . . . . . . . . . . . . . . . . . . . 8 8
Insurance contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203 203
Private funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 136
Hedge funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 56
Real estate funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 157
$4,527 $596 $3,582 $349
114
The following tables summarize changes in the fair value of Level 3 assets for the years ended
December 31, 2013 and 2012:
Private
Funds
Direct
Private
Investments
Hedge
Funds
Real Estate
Funds
Real Estate
Properties
U.S. Plans
Balance at December 31, 2011. . . . . . . . . . . . . . $1,039 $161 $ 60 $256 $553
Actual return on plan assets:
Relating to assets still held at year-end. . 44 12 11 16 29
Relating to assets sold during the year . . (1) 6 1 (1)
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147 65 4 31 41
Sales and settlements. . . . . . . . . . . . . . . . . . . . . . . (129) (17) (24) (48) (28)
Balance at December 31, 2012. . . . . . . . . . . . . . 1,100 227 52 254 595
Relating to assets still held at year-end. . (10) 34 (22) 11 61
Relating to assets sold during the year . . 117 1 22 1 4
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 37 9 15 15
Sales and settlements. . . . . . . . . . . . . . . . . . . . . . . (243) (21) (55) (44) (48)
Balance at December 31, 2013. . . . . . . . . . . . . . $1,058 $278 $ 6 $237 $627
Private
Funds
Hedge
Funds
Real Estate
Funds
Non-U.S. Plans
Balance at December 31, 2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $112 $54 $160
Relating to assets still held at year-end. . . . . . . . . . . . . . . . . . . . . . . 3 2 8
Relating to assets sold during the year . . . . . . . . . . . . . . . . . . . . . . . 3
Purchases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 21
Sales and settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) (32)
Balance at December 31, 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 56 157
Relating to assets still held at year-end. . . . . . . . . . . . . . . . . . . . . . . (6) 4 18
Relating to assets sold during the year . . . . . . . . . . . . . . . . . . . . . . . 3 (1)
Purchases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2 12
Sales and settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (70) (5)
Balance at December 31, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 67 $62 $181
The Company enters into futures contracts to gain exposure to certain markets. Sufficient cash or
cash equivalents are held by our pension plans to cover the notional value of the futures contracts. At
December 31, 2013 and 2012, our U.S. plans had contracts with notional amounts of $1,938 and
$1,241 million, respectively. At December 31, 2013 and 2012, our Non-U.S. plans had contracts with
notional amounts of $61 and $55 million, respectively. In both our U.S. and Non-U.S. pension plans,
the notional derivative exposure is primarily related to outstanding equity futures contracts.
Common stocks, preferred stocks, real estate investment trusts, and short-term investments are
valued at the closing price reported in the active market in which the individual securities are traded.
Corporate bonds, mortgages, asset-backed securities, and government securities are valued either by
using pricing models, bids provided by brokers or dealers, quoted prices of securities with similar
characteristics or discounted cash flows and as such include adjustments for certain risks that may not
be observable such as credit and liquidity risks. Certain securities are held in commingled funds which
are valued using net asset values provided by the administrators of the funds. Investments in private
115
equity, debt, real estate and hedge funds and direct private investments are valued at estimated fair
value based on quarterly financial information received from the investment advisor and/or general
partner. Investments in real estate properties are valued on a quarterly basis using the income
approach. Valuation estimates are periodically supplemented by third party appraisals.
Our general funding policy for qualified pension plans is to contribute amounts at least sufficient to
satisfy regulatory funding standards. In 2013, 2012 and 2011, we were not required to make
contributions to our U.S. pension plans. No contribution was made to the U.S. plans in 2013. However,
in 2012 and 2011, we made voluntary contributions of $792 and $1,650 million, respectively, to the
U.S. plans primarily to improve the funded status. These contributions do not reflect benefits paid
directly from Company assets. In 2013, cash contributions of $156 million were made to our non-U.S.
plans to satisfy regularly funding requirements. In 2014, we expect to make contributions of cash
and/or marketable securities of approximately $150 million ($117 million of marketable securities were
contributed in January 2014) to our non-U.S. defined benefit pension plans to satisfy regulatory funding
standards. We are not required to make any contributions to our U.S. defined benefit pension plans in
2014.
Benefit payments, including amounts to be paid from Company assets, and reflecting expected
future service, as appropriate, are expected to be paid as follows:
2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,068 $ 202
2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,111 208
2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,106 213
2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,105 219
2018. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,118 226
2019-2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,675 1,228
Other Postretirement Benefits
2013 2012
December 31,
Assumed health care cost trend rate:
Health care cost trend rate assumed for next year . . . . . . . . . . . . . . . . . . . . . 7.00% 7.00%
Rate that the cost trend rate gradually declines to. . . . . . . . . . . . . . . . . . . . . . 5.00% 5.00%
Year that the rate reaches the rate it is assumed to remain at . . . . . . . . . . 2019 2019
The assumed health care cost trend rate has a significant effect on the amounts reported. A one-
percentage-point change in the assumed health care cost trend rate would have the following effects:
Increase Decrease
1 percentage point
Effect on total of service and interest cost components . . . . . . . . . . . . . . . . $ 3 $ (2)
Effect on postretirement benefit obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $84 $(52)
Benefit payments reflecting expected future service, as appropriate, are expected to be paid as
follows:
Without Impact of
Medicare Subsidy
Net of
Medicare Subsidy
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $141 $130
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 113
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 108
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 103
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 97
2019-2023. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 448 399
116
Employee Savings Plans
We sponsor employee savings plans under which we match, in the form of our common stock,
savings plan contributions for certain eligible employees. Shares issued under the stock match plans
were 2.0, 2.4, and 2.6 million at a cost of $159, $144 and $138 million in 2013, 2012, and 2011,
respectively.
Note 24. Segment Financial Data
We globally manage our business operations through four reportable operating segments serving
customers worldwide with aerospace products and services, control, sensing and security technologies
for buildings, homes and industry, automotive products and chemicals. Segment information is
consistent with how management reviews the businesses, makes investing and resource allocation
decisions and assesses operating performance. Our four reportable segments are as follows:
Aerospace includes Air Transport and Regional, Business and General Aviation and Defense
and Space and provides products and services which include auxiliary power units; propulsion
engines; environmental control systems; electric power systems, engine controls; repair and
overhaul services; flight safety, communications, navigation, radar and surveillance systems;
aircraft lighting; management and technical services; logistic services; advanced systems and
instruments; and aircraft wheels and brakes.
Automation and Control Solutions includes Energy, Safety & Security (controls for heating,
cooling, indoor air quality, ventilation, humidification, lighting and home automation; advanced
software applications for home/building control and optimization; sensors, switches, control
systems and instruments for measuring pressure, air flow, temperature and electrical current;
security, fire and gas detection and monitoring; radiation detection; personal protection
equipment; access control; video surveillance equipment; remote patient monitoring systems;
automatic identification and data collection; and voice solutions); Process Solutions (provides a
full range of automation and control solutions for industrial plants, offering advanced software
and automation systems that integrate, control and monitor complex processes in many types of
industrial settings as well as equipment that controls, measures and analyzes natural gas
production and transportation); and Building Solutions & Distribution (installs, distributes,
maintains and upgrades systems that keep buildings safe, comfortable and productive).
Performance Materials and Technologies includes Advanced Materials (fluorocarbons, hydro-
fluoroolefins, caprolactam, resins, ammonium sulfate for fertilizer, specialty films, waxes,
additives, advanced fibers, customized research chemicals and intermediates, and electronic
materials and chemicals) and UOP (process technology, products, including catalysts and
absorbents, and services for the petroleum refining, gas processing, petrochemical, renewable
energy and other industries).
Transportation Systems includes turbochargers, thermal systems, brake hard parts and other
friction materials.
The accounting policies of the segments are the same as those described in Note 1. Honeywells
senior management evaluates segment performance based on segment profit. Segment profit is
measured as business unit income (loss) before taxes excluding general corporate unallocated
expense, other income (expense), interest and other financial charges, pension and other
postretirement benefits (expense), stock compensation expense, repositioning and other charges
and accounting changes.
117
2013 2012 2011
Net Sales
Aerospace
Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,043 $ 6,999 $ 6,494
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,937 5,041 4,981
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,980 12,040 11,475
Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,193 13,610 13,328
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,363 2,270 2,207
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,556 15,880 15,535
Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,223 5,642 5,064
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541 542 595
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,764 6,184 5,659
Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,755 3,561 3,859
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,755 3,561 3,859
Corporate
Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
$39,055 $37,665 $36,529
Depreciation and amortization
Aerospace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 200 $ 211 $ 208
Automation and Control Solutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350 352 364
Performance Materials and Technologies. . . . . . . . . . . . . . . . . . . . . . . 288 215 216
Transportation Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 85 96
Corporate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 63 64
$ 989 $ 926 $ 948
Segment Profit
Aerospace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,372 $ 2,279 $ 2,023
Automation and Control Solutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,437 2,232 2,083
Performance Materials and Technologies. . . . . . . . . . . . . . . . . . . . . . . 1,271 1,154 1,042
Corporate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (227) (218) (276)
$ 6,351 $ 5,879 $ 5,357
Capital expenditures
Aerospace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 205 $ 191 $ 174
Automation and Control Solutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 143 153
Performance Materials and Technologies. . . . . . . . . . . . . . . . . . . . . . . 429 328 282
Corporate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 93 48
$ 947 $ 884 $ 790
118
2013 2012 2011
December 31,
Total Assets
Aerospace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,160 $ 8,977 $ 9,109
Automation and Control Solutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,382 18,754 19,127
Performance Materials and Technologies. . . . . . . . . . . . . . . . . . . . . . . 6,827 6,396 5,402
Transportation Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,219 2,047 1,991
Corporate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,847 5,679 4,179
$45,435 $41,853 $39,808
A reconciliation of segment profit to consolidated income from continuing operations before taxes
are as follows:
2013 2012 2011
Segment Profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,351 $5,879 $ 5,357
Other income (expense)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 25 33
Interest and other financial charges. . . . . . . . . . . . . . . . . . . . . . . . . . (327) (351) (376)
Stock compensation expense(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (170) (170) (168)
Pension ongoing income (expense)(2) . . . . . . . . . . . . . . . . . . . . . . . 90 (36) (105)
Pension mark-to-market expense(2). . . . . . . . . . . . . . . . . . . . . . . . . . (51) (957) (1,802)
Other postretirement income (expense)(2). . . . . . . . . . . . . . . . . . . . (20) (72) 86
Repositioning and other charges(2) . . . . . . . . . . . . . . . . . . . . . . . . . . (663) (443) (743)
Income from continuing operations before taxes . . . . . . . . . . . . . . $5,412 $3,875 $ 2,282
(1) Equity income (loss) of affiliated companies is included in Segment Profit.
(2) Amounts included in cost of products and services sold and selling, general and administrative
expenses.
Note 25. Geographic AreasFinancial Data
Years Ended December 31, December 31,
Net Sales(1) Long-lived Assets(2)
2013 2012 2011 2013 2012 2011
United States . . . . . . . . . . . . . . . . . $22,978 $22,379 $21,005 $3,393 $3,118 $2,956
Europe . . . . . . . . . . . . . . . . . . . . . . . . 9,804 9,118 9,604 905 932 919
Other International . . . . . . . . . . . . . 6,273 6,168 5,920 980 951 929
$39,055 $37,665 $36,529 $5,278 $5,001 $4,804
(1) Sales between geographic areas approximate market and are not significant. Net sales are
classified according to their country of origin. Included in United Statstes net sales are export sales
of $5,431, $5,126 and $4,549 million in 2013, 2012 and 2011, respectively.
(2) Long-lived assets are comprised of property, plant and equipmentnet.
119
Note 26. Supplemental Cash Flow Information
2013 2012 2011
Payments for repositioning and other charges:
Severance and exit cost payments . . . . . . . . . . . . . . . . . . . . . $ (160) $(136) $(161)
Environmental payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (304) (320) (270)
Insurance receipts for asbestos related liabilities . . . . . . . . 58 122 134
Asbestos related liability payments. . . . . . . . . . . . . . . . . . . . . . (357) (169) (171)
$ (763) $(503) $(468)
Interest paid, net of amounts capitalized . . . . . . . . . . . . . . . . . . . . $ 330 $ 344 $ 378
Income taxes paid, net of refunds . . . . . . . . . . . . . . . . . . . . . . . . . . 1,271 919 578
Non-cash investing and financing activities:
Common stock contributed to savings plans. . . . . . . . . . . . . 159 144 138
Note 27. Unaudited Quarterly Financial Information
Mar. 31 June 30 Sept. 30 Dec. 31 Year
2013
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,328 $ 9,693 $ 9,647 $10,387 $39,055
Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,545 2,666 2,705 2,775 10,691
Net income attributable to Honeywell . . . . . . . . 966 1,021 990 947 3,924
Earnings per sharebasic . . . . . . . . . . . . . . . . . . . . 1.23 1.30 1.26 1.20 4.99
Earnings per shareassuming dilution. . . . . . . . . 1.21 1.28 1.24 1.19 4.92
Dividends paid per share. . . . . . . . . . . . . . . . . . . . . . 0.4100 0.4100 0.4100 0.4510 1.68
Market Price per share
High . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75.48 80.85 86.79 91.37 91.37
Low. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64.75 71.47 77.88 81.45 64.75
Mar. 31 June 30 Sept. 30 Dec. 31 Year
2012
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,307 $ 9,435 $ 9,342 $ 9,581 $37,665
Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,427 2,513 2,534 1,900 9,374
Net income (loss) attributable to Honeywell . . 823 902 950 251 2,926
Earnings per sharebasic . . . . . . . . . . . . . . . . . . . . 1.06 1.15 1.21 0.32 3.74
Earnings per shareassuming dilution. . . . . . . . . 1.04 1.14 1.20 0.32 3.69
Dividends paid per share. . . . . . . . . . . . . . . . . . . . . . 0.3725 0.3725 0.3725 0.4100 1.53
Market Price per share
High . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61.78 61.29 61.72 64.29 64.29
Low. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55.18 52.92 53.60 59.15 52.92
120
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
HONEYWELL INTERNATIONAL INC.;
In our opinion, the consolidated financial statements listed in the index appearing under Item
15(a)(1) present fairly, in all material respects, the financial position of Honeywell International Inc. and
its subsidiaries at December 31, 2013 and 2012, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2013 in conformity with accounting
principles generally accepted in the United States of America. In addition, in our opinion, the financial
statement schedule listed in the index appearing under item 15(a)(2) presents fairly, in all material
respects, the information set forth therein when read in conjunction with the related consolidated
financial statements. Also in our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2013, based on criteria established in
Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). The Companys management is responsible for these financial
statements and the financial statement schedule, for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in Managements Report on Internal Control over Financial Reporting under Item 9A. Our
responsibility is to express opinions on these financial statements, on the financial statement schedule
and on the Companys internal control over financial reporting based on our integrated audits. We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement and
whether effective internal control over financial reporting was maintained in all material respects. Our
audits of the financial statements included examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial statement
presentation. Our audit of internal control over financial reporting included obtaining an understanding
of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed
risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A companys internal
control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Florham Park, New Jersey
February 14, 2014
121
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable.
Item 9A. Controls and Procedures
Honeywell management, including the Chief Executive Officer and Chief Financial Officer,
conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of
the period covered by this Annual Report on Form 10-K. Based upon that evaluation, the Chief
Executive Officer and the Chief Financial Officer concluded that such disclosure controls and
procedures were effective as of the end of the period covered by this Annual Report on Form 10-K to
ensure information required to be disclosed in the reports that Honeywell files or submits under the
Exchange Act is recorded, processed, summarized, and reported within the time periods specified in
the Securities and Exchange Commission rules and forms and that it is accumulated and
communicated to our management, including our Chief Executive Officer, our Chief Financial Officer
and our Controller, as appropriate, to allow timely decisions regarding required disclosure. There have
been no changes that have materially affected, or are reasonably likely to materially affect, Honeywells
internal control over financial reporting that have occurred during the quarter ended December 31,
2013.
Managements Report on Internal Control Over Financial Reporting
Honeywell management is responsible for establishing and maintaining adequate internal control
over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act
of 1934. Honeywells internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles.
Honeywells internal control over financial reporting includes those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of Honeywells assets;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with
authorizations of Honeywells management and directors; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of Honeywells assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of Honeywells internal control over financial reporting as
of December 31, 2013. In making this assessment, management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control
Integrated Framework (1992).
Based on this assessment, management determined that Honeywell maintained effective internal
control over financial reporting as of December 31, 2013.
The effectiveness of Honeywells internal control over financial reporting as of December 31, 2013
has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm,
as stated in their report which is included in Item 8. Financial Statements and Supplementary Data.
122
Item 9B. Other Information
Not Applicable.
Item 10. Directors and Executive Officers of the Registrant
Information relating to the Directors of Honeywell, as well as information relating to compliance
with Section 16(a) of the Securities Exchange Act of 1934, will be contained in our definitive Proxy
Statement involving the election of the Directors, which will be filed with the SEC pursuant to
Regulation 14A not later than 120 days after December 31, 2013, and such information is incorporated
herein by reference. Certain other information relating to the Executive Officers of Honeywell appears
in Part I of this Annual Report on Form 10-K under the heading Executive Officers of the Registrant.
The members of the Audit Committee of our Board of Directors are: George Paz (Chair), Kevin
Burke, D. Scott Davis, Linnet Deily, Judd Gregg and Robin L. Washington. The Board has determined
that Mr. Paz is the audit committee financial expert as defined by applicable SEC rules and that Mr.
Paz, Mr. Burke, Mr. Davis, Ms. Deily and Ms. Washington satisfy the accounting or related financial
management expertise criteria established by the NYSE. All members of the Audit Committee are
independent as that term is defined in applicable SEC Rules and NYSE listing standards.
Honeywells Code of Business Conduct is available, free of charge, on our website under the
heading Investor Relations (see Corporate Governance), or by writing to Honeywell, 101 Columbia
Road, Morris Township, New Jersey 07962, c/o Vice President and Corporate Secretary. Honeywells
Code of Business Conduct applies to all Honeywell directors, officers (including the Chief Executive
Officer, Chief Financial Officer and Controller) and employees. Amendments to or waivers of the Code
of Business Conduct granted to any of Honeywells directors or executive officers will be published on
our website within five business days of such amendment or waiver.
Item 11. Executive Compensation
Information relating to executive compensation is contained in the Proxy Statement referred to
above in Item 10. Directors and Executive Officers of the Registrant, and such information is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
Information relating to security ownership of certain beneficial owners and management and
related stockholder matters is contained in the Proxy Statement referred to above in Item 10. Directors
and Executive Officers of the Registrant, and such information is incorporated herein by reference.
EQUITY COMPENSATION PLANS
As of December 31, 2013 information about our equity compensation plans is as follows:
Plan category
Number of
Shares to be
Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Rights
Weighted-
Average
Exercise Price
of Outstanding
Options,
Warrants and
Rights
Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation
Plans (Excluding
Securities
Reflected in
Column (a))
(a) (b) (c)
Equity compensation plans approved by security
holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,151,116(1) $53.27(2) 28,192,463(3)
Equity compensation plans not approved by security
holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 554,475(4) N/A(5) N/A(6)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,705,591 53.27 28,192,463
123
(1) Equity compensation plans approved by shareowners awards under which are included in column
(a) of the table are the 2011 Stock Incentive Plan of Honeywell International Inc. and its Affiliates
(the 2011 Stock Incentive Plan), the 2006 Stock Incentive Plan of Honeywell International Inc.
and its Affiliates (the 2006 Stock Incentive Plan), and the 2003 Stock Incentive Plan of Honeywell
International Inc. and its Affiliates (the 2003 Stock Incentive Plan) (30,284,081 shares of Common
Stock to be issued for options with a weighted average term of 6.43 years; 18,000 shares to be
issued for stock appreciation rights (SARs); 6,665,554 RSUs subject to continued employment;
and 1,805,848 deferred RSUs of earned and vested awards where delivery of shares has been
deferred); and the 2006 Stock Plan for Non-Employee Directors of Honeywell International Inc. (the
2006 Non-Employee Director Plan) and the 1994 Stock Plan for Non-Employee Directors of
Honeywell International Inc. (the 1994 Non-Employee Director Plan) (354,356 shares of Common
Stock to be issued for options; and 23,277 RSUs subject to continued services). RSUs included in
column (a) of the table represent the full number of RSUs awarded and outstanding whereas the
number of shares of Common Stock to be issued upon vesting will be lower than what is reflected
on the table due to the net share settlement process used by the Company (whereas the value of
shares required to meet employee statutory minimum tax withholding requirements are not issued).
1,092,801 growth plan units were issued for the performance cycle commencing on January 1,
2010 and ending December 31, 2011 pursuant to the 2006 Stock Incentive Plan. The second and
final payment related to these growth plan units was paid in March 2013, subject to active
employment on the payment date. 1,535,800 growth plan units were issued for the performance
cycle commencing January 1, 2012 and ending December 31, 2013 pursuant to the 2011 Stock
Incentive Plan. 50% of the payment related to these growth plan units, if any, will be paid in March
2014 and the remaining 50% will be paid in March 2015, subject to active employment on the
payment dates.
The ultimate value of any growth plan award may be paid in cash or shares of Common Stock and,
thus, growth plan units are not included in the table above. The ultimate value of growth plan units
depends upon the achievement of pre-established performance goals during the two-year
performance cycle.
Because the number of future shares that may be distributed to employees participating in the
Honeywell Global Stock Plan is unknown, no shares attributable to that plan are included in column
(a) of the table above.
(2) Column (b) relates to stock options and does not include any exercise price for RSUs or growth
plan units granted to employees or non-employee directors under equity compensation plans.
RSUs do not have an exercise price because their value is dependent upon attainment of certain
performance goals or continued employment or service and they are settled for shares of Common
Stock on a one-for-one basis. Growth plan units are denominated in cash and the ultimate value of
the award is dependent upon attainment of certain performance goals.
(3) The number of shares that may be issued under the 2011 Stock Incentive Plan as of December 31,
2013 is 25,913,501 which includes the following additional shares under the 2011 Stock Incentive
Plan (or any Prior Plan as defined in the 2011 Stock Incentive Plan) that may again be available for
issuance: shares that are settled for cash, expire, are canceled, or under any Prior Plan, are
tendered in satisfaction of an option exercise price or tax withholding obligations, are reacquired
with cash tendered in satisfaction of an option exercise price or with monies attributable to any tax
deduction enjoyed by Honeywell to the exercise of an option, or are under any outstanding awards
assumed under any equity compensation plan of an entity acquired by Honeywell. No securities
are available for future issuance under the 2006 Stock Incentive Plan, the 2003 Stock Incentive
Plan, or the 1994 Non-Employee Director Plan.
The number of shares that may be issued under the Honeywell Global Stock Plan as of December 31,
2012 is 2,133,595. This plan is an umbrella plan for three plans maintained solely for eligible
employees of participating non-U.S. countries.
A sub-plan of the Honeywell Global Stock Plan, the UK Sharebuilder Plan, allows an eligible UK
employee to contribute a specified percentage of their taxable earnings that is then invested in
shares. The Company matches those shares and dividends paid are used to purchase additional
124
shares of Common Stock. The match share percentage for 2013 was 62.50%. Matched shares are
subject to a three-year vesting schedule. Shares taken out of the plan before five years lose their
tax-favored status. For the year ending December 31, 2013, 77,716 shares were credited to
participants accounts under the UK Sharebuilder Plan.
The remaining two sub-plans of the Honeywell Global Stock Plan, the Honeywell International
Technologies Employees Share Ownership Plan (Ireland) and the Honeywell Measurex (Ireland)
Limited Group Employee Profit Sharing Scheme, allow eligible employees in Ireland to contribute
specified percentages of base pay, bonus or performance pay that are then invested in Common
Stock. Shares must be held in trust for at least two years and lose their tax-favored status if they
are taken out of the plan before three years. For the year ending December 31, 2013, 14,453
shares of Common Stock were credited to participants accounts under these two plans. A fourth
sub-plan, the Global Employee Stock Purchase Plan, was terminated as of February 1, 2013, and
all shares remaining in the plan on that date were transferred to direct registration accounts
maintained by the Corporations stock transfer agent.
The remaining 145,367 shares included in column (c) are shares remaining for future grants under
the 2006 Non-Employee Director Plan.
(4) Equity compensation plans not approved by shareowners that are included in the table are the
Supplemental Non-Qualified Savings Plan for Highly Compensated Employees of Honeywell
International Inc. and its Subsidiaries, the AlliedSignal Incentive Compensation Plan for Executive
Employees of AlliedSignal Inc. and its Subsidiaries and the Deferred Compensation Plan for Non-
Employee Directors of Honeywell International Inc.
The Supplemental Non-Qualified Savings Plan for Highly Compensated Employees of Honeywell
International Inc. and its Subsidiaries is an unfunded, non-tax qualified plan that provides benefits
equal to the employee deferrals and company matching allocations that would have been provided
under Honeywells U.S. tax-qualified savings plan if the Internal Revenue Code limitations on
compensation and contributions did not apply. The Company matching contribution is credited to
participants accounts in the form of notional shares of Common Stock. The notional shares are
distributed in the form of actual shares of Common Stock when payments are made to participants
under the plan. The number of shares to be issued under this plan based on the value of the
notional shares as of December 31, 2013 is 530,403.
The AlliedSignal Incentive Compensation Plan for Executive Employees of AlliedSignal Inc. and its
Subsidiaries was a cash incentive compensation plan maintained by AlliedSignal Inc. This plan has
expired. Employees were permitted to defer receipt of a cash bonus payable under the plan and
invest the deferred bonus in notional shares of Common Stock. The notional shares are distributed
in the form of actual shares of Common Stock when payments are made to participants under the
plan. No further deferrals can be made under this plan. The number of shares of Common Stock
that remain to be issued under this expired plan as of December 31, 2013 is 24,072.
The Deferred Compensation Plan for Non-Employee Directors of Honeywell International Inc.
provides for mandatory and elective deferral of certain payments to non-employee directors.
Mandatory deferrals are invested in notional shares of Common Stock. Directors may also invest
any elective deferrals in notional shares of Common Stock. Because the notional shares are
distributed in the form of cash when payments are made to directors under the plan, they are not
included in the table above.
(5) Column (b) does not include any exercise price for notional shares allocated to employees under
Honeywells equity compensation plans not approved by shareowners because all of these shares
are notionally allocated as a matching contribution under the non-tax qualified savings plans or as
a notional investment of deferred bonuses or fees under the cash incentive compensation and
directors plans as described in note 4 and are only settled for shares of Common Stock on a one-
for-one basis.
(6) No securities are available for future issuance under the AlliedSignal Incentive Compensation Plan
for Executive Employees of AlliedSignal Inc. and its Subsidiaries and the Deferred Compensation
Plan for Non-Employee Directors of Honeywell International Inc. The cash incentive compensation
125
plan has expired. All notional investments in shares of Common Stock are converted to cash when
payments are made under the directors plan. The amount of securities available for future
issuance under the Supplemental Non-Qualified Savings Plan for Highly Compensated Employees
of Honeywell International Inc. and its Subsidiaries is not determinable because the number of
securities that may be issued under this plan depends upon the amount deferred to the plan by
participants in future years.
The table does not contain information for employee benefit plans of Honeywell that are intended
to meet the requirements of Section 401(a) of the Internal Revenue Code and a small number of
foreign employee benefit plans that are similar to such Section 401(a) plans.
Item 13. Certain Relationships and Related Transactions
Information relating to certain relationships and related transactions is contained in the Proxy
Statement referred to above in Item 10. Directors and Executive Officers of the Registrant, and such
information is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
Information relating to fees paid to and services performed by PricewaterhouseCoopers LLP in
2013 and 2012 and our Audit Committees pre-approval policies and procedures with respect to non-
audit services are contained in the Proxy Statement referred to above in Item 10. Directors and
Executive Officers of the Registrant, and such information is incorporated herein by reference.
Item 15. Exhibits and Financial Statement Schedules
Page Number
in Form 10-K
(a)(1.) Consolidated Financial Statements:
Consolidated Statement of Operations for the years ended
December 31, 2013, 2012 and 2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Consolidated Statement of Comprehensive Income for the years
ended December 31, 2013, 2012 and 2011 . . . . . . . . . . . . . . . . . . . . . . 60
Consolidated Balance Sheet at December 31, 2013 and 2012. . . . . . . 61
Consolidated Statement of Cash Flows for the years ended
December 31, 2013, 2012 and 2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Consolidated Statement of Shareowners Equity for the years ended
December 31, 2013, 2012 and 2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Report of Independent Registered Public Accounting Firm. . . . . . . . . . . 121
(a)(2.) Consolidated Financial Statement Schedules:
Page Number
in Form 10-K
Schedule IIValuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . 132
All other financial statement schedules have been omitted because they are not applicable to us or
the required information is shown in the consolidated financial statements or notes thereto.
(a)(3.) Exhibits
See the Exhibit Index of this Annual Report on Form 10-K . . . . . . . . . . 128
126
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: February 14, 2014 By: /s/ Adam M. Matteo
Adam M. Matteo
Vice President and Controller
(on behalf of the Registrant
and as the Registrants
Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been
signed below by the following persons on behalf of the Registrant and in the capacities and on the date
indicated:
Name Name
* *
David M. Cote
Chairman of the Board,
Chief Executive Officer
and Director
Judd Gregg
Director
* *
Gordon M. Bethune
Director
Clive Hollick
Director
* *
Kevin Burke
Director
Grace D. Lieblein
Director
* *
Jaime Chico Pardo
Director
George Paz
Director
* *
D. Scott Davis
Director
Bradley T. Sheares, Ph.D.
Director
* *
Linnet F. Deily
Director
Robin L. Washington
Director
/s/ David J. Anderson /s/ Adam M. Matteo
David J. Anderson
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Adam M. Matteo
Vice President and Controller
(Principal Accounting Officer)
*By: /s/ David J. Anderson
(David J. Anderson
Attorney-in-fact)
February 14, 2014
127
EXHIBIT INDEX
Exhibit No. Description
3(i) Amended and Restated Certificate of Incorporation of Honeywell International Inc., as
amended April 26, 2010 (incorporated by reference to Exhibit 3(i) to Honeywells
Form 8-K filed April 27, 2010)
3(ii) By-laws of Honeywell International Inc., as amended September 27, 2013 (incorpo-
rated by reference to Exhibit 3(ii) to Honeywells Form 8-K filed September 30, 2013)
4 Honeywell International Inc. is a party to several long-term debt instruments under
which, in each case, the total amount of securities authorized does not exceed
10% of the total assets of Honeywell and its subsidiaries on a consolidated basis.
Pursuant to paragraph 4(iii)(A) of Item 601(b) of Regulation S-K, Honeywell agrees
to furnish a copy of such instruments to the Securities and Exchange Commission
upon request.
10.1* 2003 Stock Incentive Plan of Honeywell International Inc. and its Affiliates
(incorporated by reference to Honeywells Proxy Statement, dated March 17,
2003, filed pursuant to Rule 14a-6 of the Securities Exchange Act of 1934), and
amended by Exhibit 10.1 to Honeywells Form 8-K filed December 21, 2004,
Exhibit 10.1 to Honeywells Form 10-K for the year ended December 31, 2006 and
Exhibit 10.1 to Honeywells Form 10-K for the year ended December 31, 2008
10.2* Deferred Compensation Plan for Non-Employee Directors of Honeywell International
Inc., as amended and restated (incorporated by reference to Exhibit 10.2 to
Honeywells Form 10-Q for quarter ended June 30, 2003), and amended by Exhibit
10.1 to Honeywells Form 8-K filed December 21, 2004 and Exhibit 10.2 to
Honeywells Form 10-K for the year ended December 31, 2005
10.3* Stock Plan for Non-Employee Directors of AlliedSignal Inc., as amended (incorpo-
rated by reference to Exhibit 10.3 to Honeywells Form 10-Q for the quarter ended
June 30, 2003), and amended by Exhibit 10.2 to Honeywells Form 10-Q for the
quarter ended June 30, 2007 and Exhibit 10.1 to Honeywells Form 10-Q for the
quarter ended September 30, 2008
10.4* Honeywell International Inc. Incentive Compensation Plan for Executive Employees,
as amended and restated (filed herewith)
10.5* Supplemental Non-Qualified Savings Plan for Highly Compensated Employees of
Honeywell International Inc. and its Subsidiaries, as amended and restated
(incorporated by reference to Exhibit 10.6 to Honeywells Form 10-K for the year
ended December 31, 2008), and amended by Exhibit 10.5 to Honeywells Form 10-
K for the year ended December 31, 2010, Exhibit 10.1 to Honeywells Form 10-Q
for the quarter ended June 30, 2012, and the attached amendment (filed herewith)
10.6* Honeywell International Inc. Severance Plan for Designated Officers, as amended
and restated (filed herewith)
10.7* Salary and Incentive Award Deferral Plan for Selected Employees of Honeywell
International Inc. and its Affiliates, as amended and restated (incorporated by
reference to Exhibit 10.8 to Honeywells Form 10-K for the year ended December
31, 2008), and amended by the attached amendment (filed herewith)
10.8* Honeywell International Inc. Supplemental Pension Plan, as amended and restated
ended December 31, 2008), and amended by Exhibit 10.10 to Honeywells Form
10-K for the year ended December 31, 2009
10.9* Honeywell International Inc. Supplemental Executive Retirement Plan for Executives
in Career Band 6 and Above, as amended and restated (incorporated by reference
to Exhibit 10.12 to Honeywells Form 10-K for the year ended December 31, 2008),
and amended by Exhibit 10.12 to Honeywells Form 10-K for the year ended
December 31, 2009, and the attached amendment (filed herewith)
128
10.10* Honeywell Supplemental Defined Benefit Retirement Plan, as amended and restated
ended December 31, 2008), and amended by Exhibit 10.13 to Honeywells Form
10.11* Letter between David J. Anderson and Honeywell International Inc. dated June 12,
2003 (incorporated by reference to Exhibit 10.26 to Honeywells Form 10-Q for the
quarter ended June 30, 2003), and amended by Exhibit 10.14 to Honeywells Form
10.12* Honeywell International Inc. Severance Plan for Corporate Staff Employees
(Involuntary Termination Following a Change in Control), as amended and restated
(filed herewith)
10.13* Employment Agreement dated as of February 18, 2002 between Honeywell and
David M. Cote (incorporated by reference to Exhibit 10.24 to Honeywells Form 8-K
filed March 4, 2002), and amended by Exhibit 10.3 to Honeywells Form 10-Q for
the quarter ended September 30, 2008, Exhibit 10.17 to Honeywells Form 10-K for
the year ended December 31, 2008, and Exhibit 10.1 to Honeywells Form 10-Q for
the quarter ended March 31, 2013
10.14* 2003 Stock Incentive Plan for Employees of Honeywell International Inc. and its
Affiliates Award Agreement (incorporated by reference to Exhibit 10.1 to
Honeywells Form 8-K filed February 7, 2005)
10.15* 2003 Stock Incentive Plan for Employees of Honeywell International Inc. and its
Affiliates Restricted Unit Agreement (incorporated by reference to Exhibit 10.21 to
Honeywells Form 10-K for the year ended December 31, 2005)
10.16* Stock Plan For Non-Employee Directors of Honeywell International Inc. Option
Agreement (incorporated by reference to Exhibit 10.1 to Honeywells Form 8-K filed
April 29, 2005)
10.17* Deferred Compensation Agreement dated August 4, 2006 between Honeywell and
David M. Cote (incorporated by reference to Exhibit 10.22 to Honeywells Form 10-
K for the year ended December 31, 2006) and amended by Exhibit 10.22 to
Honeywells Form 10-K for the year ended December 31, 2009
10.18* Honeywell Supplemental Retirement Plan (incorporated by reference to Exhibit 10.24
to Honeywells Form 10-K for the year ended December 31, 2006)
10.19* Pittway Corporation Supplemental Executive Retirement Plan (incorporated by
reference to Exhibit 10.25 to Honeywells Form 10-K for the year ended December
31, 2006) and amended by Exhibit 10.25 to Honeywells Form 10-K for the year
ended December 31, 2008 and Exhibit 10.25 to Honeywells 10-K for the year
ended December 31, 2009
10.20* 2006 Stock Incentive Plan of Honeywell International Inc. and Its Affiliates, as
amended and restated (incorporated by reference to Exhibit 10.26 to Honeywells
Form 10-K for the year ended December 31, 2008), and amended by Exhibit 10.1
to Honeywells 10-Q for the quarter ended March 31, 2011
10.21* 2006 Stock Incentive Plan of Honeywell International Inc. and Its AffiliatesForm of
Option Award Agreement (incorporated by reference to Exhibit 10.2 to Honeywells
Form 10-Q for the quarter ended March 31, 2009)
Restricted Unit Agreement (incorporated by reference to Exhibit 10.1 to
Honeywells Form 10-Q for the quarter ended March 31, 2009)
Growth Plan Agreement (incorporated by reference to Exhibit 10.1 to Honeywells
129
Performance Share Agreement (incorporated by reference to Exhibit 10.30 to
10.25* 2006 Stock Plan for Non-Employee Directors of Honeywell International Inc., as
amended and restated (incorporated by reference to Exhibit 10.31 to Honeywells
Form 10-K for the year ended December 31, 2008), and amended by Exhibit 10.27
to Honeywells Form 10-K for the year ended December 31, 2011
10.26* 2006 Stock Plan for Non-Employee Directors of Honeywell International Inc.Form
of Option Agreement (incorporated by reference to Exhibit 10.3 to Honeywells
10.27* 2006 Stock Plan for Non-Employee Directors of Honeywell International Inc.Form
of Restricted Unit Agreement (incorporated by reference to Exhibit 10.4 to
Honeywells Form 10-Q for the quarter ended March 31, 2012)
10.28* 2007 Honeywell Global Employee Stock Plan (incorporated by reference to
Honeywells Proxy Statement, dated March 12, 2007, filed pursuant to Rule 14a-
6 of the Securities Exchange Act of 1934)
10.29* Letter Agreement dated July 20, 2007 between Honeywell and Roger Fradin
(incorporated by reference to Exhibit 10.1 to Honeywells Form 10-Q for the quarter
ended September 30, 2007) and amended by Exhibit 10.36 to Honeywells Form
10.30* Letter Agreement dated October 6, 2010 between Honeywell and Roger Fradin
ended December 31, 2010) and amended by Exhibit 10.1 to Honeywells Form 10-
Q for the quarter ended September 30, 2012
10.31* Employee Non-Competition Agreement dated October 26, 2010 for Andreas Kramvis
ended December 31, 2010)
10.32* 2006 Stock Incentive Plan of Honeywell International Inc. and its AffiliatesForm of
Restricted Unit Agreement, Form 2 (incorporated by reference to Exhibit 10.2 to
Honeywells Form 10-Q for the quarter ended June 30, 2010)
Option Award Agreement, Form 2 (incorporated by reference to Exhibit 10.37 to
10.34* Letter Agreement dated September 3, 2009 between Honeywell and Timothy
Mahoney (incorporated by reference to Exhibit 10.38 to Honeywells Form 10-K for
the year ended December 31, 2010)
10.35* Form of Honeywell International Inc. Noncompete Agreement for Senior Executives
ended December 31, 2010)
10.36* 2011 Stock Incentive Plan of Honeywell International Inc. and its Affiliates
(incorporated by reference to Honeywells Proxy Statement, dated March 10,
2011, filed pursuant to Rule 14a-6 of the Securities Exchange Act of 1934), and
amended by Exhibit 10.36 to Honeywells Form 10-K for the year ended December
31, 2012
Restricted Unit Agreement (filed herewith)
Restricted Unit Agreement, Form 2 (filed herewith)
Stock Option Award Agreement (filed herewith)
Growth Plan Agreement (filed herewith)
130
10.41* Letter Agreement dated August 4, 2011 between Honeywell International Inc. and
David M. Cote (incorporated by reference to Exhibit 10.1 to Honeywells Form 10-Q
for the quarter ended September 30, 2011)
10.42 Amended and Restated Five Year Credit Agreement dated as of December 10, 2013
by and among Honeywell International Inc., the banks, financial institutions and
other institutional lenders parties thereto, Citibank, N.A., as administrative agent,
Citibank International PLC, as swing line agent, JPMorgan Chase Bank, N.A., as
syndication agent, Bank of America, N.A., Barclays Bank PLC, Deutsche Bank
Securities Inc., Goldman Sachs Bank USA, Morgan Stanley MUFG Loan Partners,
LLC and The Royal Bank of Scotland PLC, as documentation agents, and
Citigroup Global Markets Inc., and J.P. Morgan Securities LLC, as joint lead
arrangers and co-book managers (incorporated by reference to Exhibit 10.1 to
Honeywells Form 8-K filed December 11, 2013)
10.43 Stock and Asset Purchase Agreement dated June 9, 2008, by and between
Honeywell International Inc. and BE Aerospace, Inc. (incorporated by reference to
Exhibit 10.1 to Honeywells Form 8-K filed June 11, 2008)
10.44 Tender Offer Agreement dated May 19, 2010 by and among Sperian Protection S.A.,
Honeywell International Inc. and Honeywell Holding France SAS (incorporated by
reference to Exhibit 10.1 to Honeywells Form 10-Q for the quarter ended June 30,
2010)
10.45 Stock and Asset Purchase Agreement dated January 27, 2011 by and among
Honeywell International Inc., Rank Group Limited and Autoparts Holdings Limited,
(incorporated by reference to Exhibit 10.1 to Honeywells Form 8-K filed January
31, 2011)
12 Statement re: Computation of Ratio of Earnings to Fixed Charges (filed herewith)
21 Subsidiaries of the Registrant (filed herewith)
23 Consent of PricewaterhouseCoopers LLP (filed herewith)
24 Powers of Attorney (filed herewith)
31.1 Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002 (filed herewith)
31.2 Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002 (filed herewith)
32.1 Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith)
32.2 Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith)
101.INS XBRL Instance Document (filed herewith)
101.SCH XBRL Taxonomy Extension Schema (filed herewith)
101.CAL XBRL Taxonomy Extension Calculation Linkbase (filed herewith)
101.DEF XBRL Taxonomy Extension Definition Linkbase (filed herewith)
101.LAB XBRL Taxonomy Extension Label Linkbase (filed herewith)
101.PRE XBRL Taxonomy Extension Presentation Linkbase (filed herewith)
The Exhibits identified above with an asterisk (*) are management contracts or compensatory
plans or arrangements.
131
SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS
Three Years Ended December 31, 2013
Allowance for Doubtful Accounts:
Balance December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 279
Provision charged to income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Deductions from reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (113)
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Balance December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Deferred Tax AssetsValuation Allowance
Additions charged to income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Reductions credited to income tax expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (152)
Reductions due to expiring NOLs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8)
Reductions due to capital loss carryforwards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5)
Reductions credited to equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13)
Additions charged to goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Reductions due to expiring NOLs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2)
Reductions due to capital loss carryforwards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Reductions credited to equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Reductions credited to goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (35)
Reductions due to capital loss carryforwards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27)
Reductions credited to equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8)
Additions charged to goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
132
LEADERSHIP TEAM AND
CORPORATE OFFICERS
SHAREOWNER
INFORMATION
DAVID M. COTE
Chairman and
KATHERINE L. ADAMS
General Counsel
DAVID J. ANDERSON
Chief Financial Officer
ROGER FRADIN
President and
Automation and Control
Solutions
TERRENCE A. HAHN
President and
ALEXANDRE ISMAIL
President
Energy, Safety and
Security
MARK R. JAMES
Senior Vice President
Human Resources,
Procurement and
Communications
ANDREAS C. KRAMVIS
President and
Performance
Materials and
Technologies
TIMOTHY O. MAHONEY
President and
Aerospace
KRISHNA MIKKILINENI
Engineering, Operations,
and Information
Technology
HARSH BANSAL
Vice President
Investments
THOMAS L. BUCKMASTER
Vice President
Communications
and President Honeywell
Hometown Solutions
RHONDA GERMANY
Corporate Vice President
Chief Strategy and
Marketing Officer
RICHARD W. GRABER
Global Government
Relations
ADAM M. MATTEO
Vice President and
Controller
JEFFREY N. NEUMAN
Vice President
Corporate Secretary and
Deputy General Counsel
THOMAS A. SZLOSEK
Vice President Corporate
Finance
SHANE TEDJARATI
President High Growth
Regions
JOHN J. TUS
Vice President and
Treasurer
ANNUAL MEETING
The Annual Meeting of Shareowners will be held at 10:30
a.m. on Monday, April 28, 2014, at Honeywells corporate
headquarters, 101 Columbia Road, Morristown, New
Jersey, 07962.
DIVIDENDS/SHAREOWNERS MATTERS
Honeywells Dividend Reinvestment and Share Purchase
Plan provides for automatic reinvestment of common stock
dividends at market price. Participants also may add cash
for the purchase of additional shares of common stock
without payment of any brokerage commission or service
charge. Honeywell offers Direct Registration, or paperless
stock ownership. This means that instead of getting a
paper stock certificate to represent your shares, your
shares are held in your name and tracked electronically in
our records.
The company has established a Direct Deposit of
Dividends service enabling registered shareowners to
have their quarterly dividend payments sent electronically
to their bank accounts on the payment date.
For more information on these services or for answers to
questions about dividend checks, stock transfers, or other
shareowner matters, please contact Honeywells transfer
agent and registrar:
AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC
6201 15th Avenue
Brooklyn, NY 11219
1-800-647-7147
http://www.amstock.com
E-mail: info@amstock.com
Corporate Publications
101 Columbia Road
Morristown, NJ 07962-2245
1-973-455-2000
STOCK EXCHANGE LISTINGS
Honeywells Common Stock is listed on the New York and
Chicago stock exchanges under the symbol HON. It is
also listed on the London Stock Exchange. Shareowners
of record as of December 31, 2013, totaled 55,537.
GENERAL INQUIRIES
For additional shareowner inquiries, please contact
Honeywells Shareowner Services at 1-800-647-7147 or
Honeywell Investor Relations at 1-973-455-2222.
Honeywell International Inc.
101 Columbia Road
P.O. Box 2245
Morristown, NJ 07962-2245
USA
Aerospace Automation and Control Solutions Performance Materials and Technologies
For more information about Honeywell, visit www.honeywell.com.

Honeywell 2013 Annual Report

Încărcat de

Informații document

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Honeywell 2013 Annual Report

Încărcat de

Drepturi de autor:

Formate disponibile

A N N U A L R E P O R T 2 0 1 3

100 126.46 145.51 148.59 172.37 228.19

S-ar putea să vă placă și